Sweetgreen (SG) Q1 2023 results

sweet green on Thursday reported The first-quarter loss was smaller than expected after the company slowed expansion and focused on profitability.

The salad chain, which went public in November 2021, aims to start making profits by 2024. Last quarter, it announced that it would take a more conservative approach to entering new markets. It also reduces support center costs and simplifies the management structure.

Sweetgreen’s shares were up 7% in extended trading.

Here’s what the company reported versus Wall Street expectations, based on a Refinitiv analyst poll:

• Loss per share: 30 cents versus 35 cents expected
• Revenue: $125.1 million versus $126 million expected

The salad chain reported a net loss of $33.7 million, or 30 cents a share, in the first quarter, narrowing its net loss from $49.7 million, or 45 cents a share, a year earlier.

Sweetgreen said its restaurant-level profit margins improved 1% during the quarter.

net sales was up 22% year over year to $125.1 million, and same-store sales rose 5%, beating FactSet’s estimate of 4.9%. Quarterly traffic increased 2%, while menu prices rose 3% compared to the same period last year.

Sweetgreen CEO Jonathan Neman told CNBC that the chain’s Chicken + Chipotle Pepper Bowl attracted new customers and created a stir. The menu item was Sweetgreen’s first warm bowl with no lettuce.

But some of the excitement may stem from Chipotle’s lawsuit against Sweetgreen for alleged copyright infringement of the item’s original name, Chipotle Chicken Burrito Bowl. The two fast-casual chains reached an interim settlement shortly after Chipotle filed the lawsuit, which included renaming the bowl.

Digital transactions accounted for 61% of revenue, down slightly from last year when they accounted for two-thirds of revenue. Neman said the drop was the result of more personal orders, which boosted Sweetgreen’s overall sales.

The Company opened a total of nine new restaurant locations during the quarter. The company plans to open between 30 and 35 new locations in 2023, including two restaurants with automated kitchens using the Spyce acquisition’s technology. The first of those restaurants, which it calls Infinite Kitchens, opens Wednesday in Naperville, Illinois, outside of Chicago.

“We expect this to result in a higher margin profile and better unit economics,” Neman said. “It’s a pilot project so we’ll learn a lot from it very early on, but overall I’m really looking forward to bringing it to life.”

Sweetgreen reiterated the majority of its 2023 guidance, which projects sales of between $575 million and $595 million and same-store sales growth of 2% to 6%.

However, it updated its guidance for adjusted earnings before interest, taxes, depreciation and amortization from a loss of between $13 million and $15 million to a loss of between $13 million and $3 million. The company said the update was due to a $6.9 million benefit from employee retention tax credits.