CAVA Group (CAVA, Financial) has been trading at new post-IPO highs this week. As it's a slow news day, let's profile this Mediterranean fast-casual restaurant chain. CAVA aims to create the next large-scale cultural cuisine category, appealing to a diverse customer base, with strong Millennial and growing Gen Z followings.
- CAVA is in the early stages of reaching its full restaurant potential. The company envisions over 1,000 CAVA locations in the US by 2032, up from 309 at the end of 2023. The 2018 acquisition of Zoes Kitchen accelerated CAVA's expansion by converting Zoes Kitchen locations to the CAVA brand, a process now complete.
- Over 85% of CAVA's restaurants are in suburban areas, primarily in the Southeast, Sunbelt, and West. Recently, CAVA entered the upper Midwest, including Chicago and its suburbs.
- At a recent investor conference, CAVA highlighted that the Mediterranean diet has been the top-ranked diet for seven years. Despite its health benefits, Mediterranean cuisine is underrepresented in the US restaurant scene. CAVA benefits from an increasingly diverse population seeking bold, adventurous flavors without sacrificing health.
- CAVA's menu offers broad appeal for both lunch and dinner, allowing customers to customize bowls to their dietary needs and preferences, including vegan, vegetarian, lactose-free, gluten-free, and spicy options.
- CAVA's offerings appeal across income levels. While traditional full-service dining struggles to provide value and fast food prices rise, consumers find that for $1-2 more, or even the same price, they can enjoy a healthy, fresh meal at CAVA. The brand sits at the convergence of high-end full-service dining and fast food.
In late May, CAVA reported Q1 results, marking its largest EPS beat in the last three quarters. Revenue increased by 27.5% year-over-year to $259 million. However, Q1 comps at +2.3% were slightly disappointing compared to +11.4% in Q4 and +17.9% for all of 2023. It's worth noting that CAVA was lapping a significant +28.5% comp from the previous year, driven by pre-IPO buzz. Encouragingly, CAVA raised its FY24 comp guidance to +4.5-6.5% from +3-5%, indicating that Q1 comps exceeded internal expectations. Overall, CAVA is a stock to keep an eye on.
