Cava shares tumbled 16% on Wednesday, marking the latest setback for fast-casual chains struggling with slowing sales and weakening investor confidence. Once the darlings of Wall Street, brands like Chipotle, Cava, Shake Shack, and Sweetgreen are now grappling with a sharp decline in foot traffic and same-store sales.
Just a year ago, many of these eateries were reporting double-digit sales growth, even as the wider restaurant industry lagged. This spring, however, consumer caution set in, leading to reduced spending on premium fast-casual meals. Executives point to economic uncertainty, with diners hesitant to splurge in a “fog” of shifting conditions.
Stock performance across the sector reflects the shift. Year-to-date, Shake Shack is down 16%, Chipotle 28%, Cava 37%, and Sweetgreen 70%. Only Wingstop has posted gains, up 20%. Industry-wide, both fast-casual and fast-food operators have reported weaker traffic despite their reputations for resilience during downturns.
Economic anxiety is hitting even higher-income, white-collar consumers — the core demographic for fast-casual brands. Chipotle’s leadership cited pullbacks among lower-income diners as a key factor in its 4% same-store sales drop last quarter, noting that many consumers are gravitating toward lower-priced meals and value promotions.
Consumer sentiment data backs this up: the University of Michigan index slid to 52.2 in April, holding steady in May before rising to 60.7 in June. Chain executives say customers remain wary about prices, job prospects, and the broader economy.
Sweetgreen reported a particularly rough quarter, with sales hurt by softer urban demand, a difficult comparison to last year’s steak launch, and changes to its loyalty program. To boost value perception, the salad chain is increasing protein portions, enhancing recipes, and introducing promotional pricing.
Cava, which had dazzled investors since its IPO, saw same-store sales grow just 2.1% last quarter, well below expectations of 6.1% and a sharp slowdown from 14.4% growth a year ago. Executives cited difficult comparisons to last year’s product launches and cooling demand at newer stores. While acknowledging macroeconomic headwinds, they noted that sales have improved early in the third quarter.
Other chains are cautiously optimistic as summer progresses. Chipotle reported traffic growth resuming in July, Sweetgreen saw modest improvement, and Wingstop expects easier year-over-year comparisons ahead. Still, with sentiment fragile, the fast-casual sector’s path back to strong growth may hinge on delivering value and navigating a more cautious consumer mindset.
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