Sweetgreen (SG 4.89%) is a small but growing chain of fast-casual restaurants, one of several that have cropped up over the past few years in the wake of Chipotle Mexican Grill's great success. Although it continues to open new stores, it's faced several problems, both internal and external, that have impeded its own success, and its stock price has dropped 76% over the past year.
It might look like an attractive value at this point, trading at only 1.4 times trailing 12-month sales. But if you're considering buying the stock, read this first.
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Problems from the inside
Sweetgreen operates about 280 restaurants across the country, and it's opening them at a fairly slow rate; it guided for 37 store openings in 2025, and it's planning to open another 15 to 20 stores in 2026.
There's been a lot of change at Sweetgreen recently, as well as some internal issues that are keeping it from growing and expanding faster. Its restaurants had fallen below its operational standards, with only one-third meeting them before a reorganization and turnaround plan. The latest update says that 60% currently meet the standards. That's healthy improvement, but it still has a way to go.
It's working on five different areas: operational excellence, brand relevance, food quality and menu innovation, the digital experience, and profitability. That's a lot, but if it continues to make progress, there will probably be a domino effect whereby all of the work gets the company to all or most of these goals. Management has made several new hires to implement an action plan, and considering its performance today, it may not be too difficult to report some sort of progress.
In the 2025 fiscal third quarter (ended Sept. 28), sales dropped 0.6% year over year, and comparable sales (comps) were down 9.5%. It reported a $36.3 million operating loss and a restaurant-level profit margin of 13.1%, down from 20.1% the year before.
NYSE: SG
Key Data Points
Problems from the outside
Unfortunately, the external environment might make a recovery more challenging. Inflation is still high, and other fast-casual chains, such as Chipotle and Cava, are also feeling pressure in their comps growth, although not as severely as Sweetgreen.
The question is whether Sweetgreen is a bargain at the current price or a value trap, and the answer might depend on your risk tolerance. If Sweetgreen continues to make progress on its goals, it could be a real turnaround story and offer value at the current price. However, that's not a given, and it could be another down year for Sweetgreen.
