Sweetgreen cuts outlook for second time in two quarters

Introduction to Sweetgreen’s Struggles

People walk past a Sweetgreen restaurant in Manhattan. Sweetgreen shares dropped 23% on Friday after the salad chain cut its 2025 outlook for the second quarter in a row, citing issues with its loyalty program, weak consumer sentiment, tariff headwinds, and store challenges.

Revised Outlook for 2025

For the full-year 2025, Sweetgreen now expects revenue of between $700 million and $715 million, down from its May prediction of $740 million to $760 million and its February outlook of $760 million to $780 million. It also projects negative same-store sales for the full year, estimating declines of between 4% and 6%, down from its original outlook of single-digit growth. Restaurant-level profit margin for 2025 is expected to be 200 basis points lower than Sweetgreen’s latest outlook in May. That includes a 40 basis-point hit due to the effect of tariffs.

Performance in the Second Quarter

On a Thursday call with analysts, CEO Jonathan Neman said Sweetgreen had a "really, really rough quarter." He said both external headwinds and internal actions played a role in the performance, including "a more cautious consumer environment starting in April, lapping a tough comparison with last year’s successful steak launch and the transition of our new loyalty program at the beginning of the quarter." The company reported a second-quarter earnings and revenue miss, reporting a loss of 20 cents per share versus a loss of 12 cents expected by analysts surveyed. Revenue came in at $186 million compared with the estimate of $192 million.

Same-Store Sales and Loyalty Program Challenges

Same-store sales dropped 7.6% during the quarter, significantly underperforming the same quarter a year earlier when the company reported a same-store sales increase of 9.3%. Analysts were expecting a second-quarter decline of 5.5%. Executives said "loyalty headwinds" played a key role in the results. Neman said the transition from the Sweetgreen+ subscription program to a new program, SG Rewards, generated a 250 basis-point headwind to the company’s second-quarter same-store sales. He said Sweetgreen saw a falloff in revenue from that small but high-frequency cohort of Sweetgreen+ customers, but he said he believes the effect will be temporary.

Plans for Improvement

Going forward, company leaders said they are focused on improving customer satisfaction and operations in stores. Neman told investors that only one-third of restaurants are performing at or above standards, while the remaining two-thirds "represent a meaningful opportunity for improvement." He said the company is aiming to improve operations through the leadership of its new chief operating officer, Jason Cochran, and the launch of a new program called Project One Best Way, focused on improving speed and food standards and increasing portion sizes.

Consumer Sentiment and Its Impact

Consumer sentiment has played a role in the company’s performance. Sweetgreen Chief Financial Officer Mitch Reback said pressure on consumer spending has persisted longer than expected. "It’s pretty obvious that the consumer is not in a great place overall," Neman said.

Conclusion

Sweetgreen’s revised outlook and second-quarter performance reflect the challenges the company is facing, including issues with its loyalty program, weak consumer sentiment, and store challenges. The company’s plans to improve operations and customer satisfaction are crucial for its future success. As the consumer environment continues to evolve, Sweetgreen must adapt to meet changing demands and preferences.

FAQs

Q: What led to Sweetgreen’s shares dropping 23%?
A: Sweetgreen’s shares dropped 23% after the company cut its 2025 outlook for the second quarter in a row, citing issues with its loyalty program, weak consumer sentiment, tariff headwinds, and store challenges.
Q: What is Sweetgreen’s revised revenue outlook for 2025?
A: Sweetgreen now expects revenue of between $700 million and $715 million for the full-year 2025.
Q: What was the impact of the transition to the new loyalty program on same-store sales?
A: The transition from the Sweetgreen+ subscription program to SG Rewards generated a 250 basis-point headwind to the company’s second-quarter same-store sales.
Q: How does Sweetgreen plan to improve its operations?
A: Sweetgreen plans to improve operations through the leadership of its new chief operating officer, Jason Cochran, and the launch of a new program called Project One Best Way, focused on improving speed and food standards and increasing portion sizes.
Q: What role has consumer sentiment played in Sweetgreen’s performance?
A: Consumer sentiment has played a significant role in Sweetgreen’s performance, with pressure on consumer spending persisting longer than expected and affecting the company’s sales and revenue.