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Key Takeaways
- The Mediterranean fast-casual chain Cava is seeing younger consumers come in less frequently, though they tend to be ordering just as much, CFO Tricia Tolivar.
- This demographic is facing a number of economic headwinds, such as higher student loan bills, and is also dining out less at another fast-casual chain: Chipotle.
Cava is the latest fast-casual brand to warn that younger consumers are losing their appetites.
The Mediterranean-style fast-casual chain late Tuesday reported slower same-restaurant sales and revenue growth in the third quarter than in recent periods. Cava Group (CAVA) is not immune from the economic pressures weighing on 18- to 34-year-olds, CFO Tricia Tolivar said, though she said it is attracting a bigger share of those still dining out.
“Within their basket at Cava, we’re not seeing significant changes,” Tolivar told Investopedia, noting that consumers are ordering typical levels of premium proteins, drinks and pita chips. But there is “more of an overall general sense of being thoughtful about frequency” of dining out, she said.
What This News Means for Consumers
Some fast-casual chains say that in the face of an uncertain economy, younger consumers are eating out less frequently. The sector, Chipotle executives said, has developed a reputation for suboptimal value at a time when that’s exactly what diners are looking for. Cava, which reported quarterly results today, is the latest to tell its version of this story.
Chipotle Mexican Grill (CMG) also highlighted caution among young Americans, specifically citing 25- to 34-year-olds who make less than $100,000 annually. Both Cava and Chipotle want to be known for offering value, with fresh ingredients and generous portions. But the fast-casual sector’s reputation in that respect has taken a hit as young Americans face growing student loan bills, slower wage growth and an unfavorable job market, Chipotle CEO Scott Boatwright said on a conference call last week.
“The fast-casual sector is just out of favor and has been deemed unaffordable,” Boatwright said, according to a transcript made available by AlphaSense. He said Chipotle needs to better showcase the value it offers and to “differentiate what makes Chipotle unique and special.”
Cava reported same-restaurant sales growth of 1.9% year-over-year in the third quarter, along with a 20% increase in revenue to nearly $290 million. Both figures came in below analyst expectations, according to Visible Alpha consensus estimates. Diluted earnings per share of $0.12 were also shy of the $0.13 anticipated. The company lowered its outlook for the full fiscal year.
The eatery says a popular steak offering in 2024 skewed year-over-year comparisons. Still, Cava’s same-restaurant sales growth is the lowest year-over-year rate reported by Cava over the past 10 quarters, according to data from Visible Alpha.
Tolivar said there are some bright spots for Cava. People are unlikely to cut back by recreating Cava meals at home, she said, since many items like shawarma, meat cooked on a spit, can be challenging to make.
Cava is also seeing “strength in the lower-income brackets,” where people may appreciate that Cava has raised prices less than others in recent years, Tolivar said.
“We’re more accessible to lower-income consumers now than we have been in the past,” she said.
Shares of Cava finished Tuesday down less than 2% ahead of the results, leaving them off some 54% for 2025. Read Investopedia’s full daily markets coverage here.
