Mediterranean restaurant chain Cava forecasts annual sales above estimates

By Sanskriti Shekhar and Juveria Tabassum

Feb 24 (Reuters) - Cava Group CAVA.N forecast annual same-store sales above Wall Street estimates on Tuesday, betting on resilient demand for its healthy Mediterranean bowls, even as higher commodity and tariff-related costs pressure its margins.

Shares of the company were up about 8% in extended trading after Cava also posted a surprise rise in quarterly same-store sales.

The company's customizable protein and fiber-rich Mediterranean bowls, pitas and salads priced roughly between $11 and $16 were appealing to consumers as diets change in light of increased adoption of appetite-supressing weight-loss drugs, CEO Brett Schulman told Reuters.

Cava expects a 1.4% price hike on some premium and side items, but would keep prices unchanged on its main chicken and falafel bowls and pitas, and launch its first seafood protein bowl at the end of the current quarter, Schulman added.

"There's certainly a lot of anxiety around the impact of AI on entry level jobs, which would directly affect Gen-Z, but diving in underneath the data that consumer (is) still spending ... they have a heightened sensitivity to where they're spending their dollars," Schulman said.

Cava expects fiscal 2026 same-restaurant sales to increase between 3% and 5%, above analysts' average estimate of a 3.16% rise, according to data compiled by LSEG.

Higher prices of commodities such as beef, as well as elevated packaging costs, due to U.S. import tariffs, led to a decline of 60 basis points in restaurant-level profit margin to 24.4% in fiscal year 2025.

The company expects a profit margin for fiscal 2026 to be below that level, between 23.7% and 24.2%.

Rival Chipotle Mexican Grill CMG.N also flagged margin pressure earlier this month due to higher prices of key ingredients such as beef, as well as choppy spending.

Cava's fourth-quarter same-store sales rose 0.5%, compared with estimates of a fall of 0.85%.