All Hail Cava, The Slop Bowl King

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Cava’s stock is cooking on Wednesday after the company reported a big first-quarter beat after the bell on Tuesday.

The fast-casual chain looks like a big winner in a slop-bowl sector under pressure: Same-store sales, the key metric investors watch for in restaurant businesses, increased 9.7% driven mostly by new customers. Cava also upped its revenue forecast, saying it plans to open up to 77 restaurants this fiscal year and projected same-store sales growth to come in at 4.5-6.5%, up from 3-5%. Adjusted EBITDA is expected to hit up to $191 million, up from $184 million.

The company reported $434 million in revenue, up over 32% from the same quarter a year prior and above the Street’s consensus of $418 million. Net income fell slightly, from $25.7 million to $23.6 million, though the company says that’s mostly due to equity-based compensation pushing the company into a higher tax bracket as well as depreciation costs. Earnings per share hit $0.20, which is down slightly from the same quarter a year prior but still above analyst expectations of $0.17.

The company’s unit economics are improving, a rarity in the fast casual business as rising energy costs thanks to the Iran conflict and inflation force consumers to pare back spending. Restaurant level profit margin, which is a non-GAAP way of reporting how much profits restaurants made after deducting operating costs, hit $108.9 million, or 32% above the same quarter a year prior. That boils down to a 25% per restaurant profit margin, which leads the slop-bowl space. Sweetgreen, for example, reported margins as low as 10% in the first quarter of this year. Taking the average across the big publicly traded fast casual chains, the average is about 18-22%.

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Shares surged over 6% in after hours Tuesday, before selling off a bit Wednesday morning and recovering. The stock is up about 6% as of mid-morning Wednesday.

“Amid today's broader macroeconomic environment and geopolitical uncertainty, our first quarter results reflect our position as a clear industry leader and our ability to meet the moment for the modern consumer,” Cava co-founder and CEO Brett Schulman said.

Cava seems to be resilient among its peers to an economy that has consumers staying home and reheating leftovers. Watch whether the company can sling enough tzatziki to hit its full-year guidance, and whether same-store sales continue to outperform.