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Here's Why You Should Retain Sweetgreen Stock in Your Portfolio Now
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Shares of Sweetgreen, Inc. (SG - Free Report) have gained 23.6% in the past three months compared with the industry’s 6.3% growth. The company is benefiting from solid traffic and strategic pricing. Also, the focus on menu innovation and expansion efforts bode well. However, elevated expenses are a concern.
Growth Catalysts for SG Stock
Sweetgreen’s growth strategy is centered on two key pillars: menu innovation and restaurant expansion. The company opened four new restaurants in the second quarter, with a strong pipeline of new openings planned for the rest of 2024 and beyond. Impressively, its new cohort of restaurant openings, which include locations in Washington, DC, Chicago, and a new market in New Hampshire, are outperforming the existing fleet in terms of weekly revenues. By focusing on strategic real estate choices and investing in brand awareness, Sweetgreen has entered emerging markets like the Midwest, Texas and the Southeast. The company reported double-digit same-store sales growth in the region.
Image Source: Zacks Investment Research
Sweetgreen’s success is not just about expanding its footprint, it’s also about constantly innovating its menu to keep customers engaged. The launch of Caramelized Garlic Steak and protein plates has driven increased traffic and higher check sizes, particularly during dinner and weekends. During the second quarter, dinner accounted for 40% of Sweetgreen’s total sales, a 3% increase year over year. The company emphasizes creating craveable, high-quality offerings to build customer loyalty and attract new guests.
A standout feature of Sweetgreen’s expansion is the integration of its Infinite Kitchen concept, which debuted in Penn Plaza, New York. This innovation has been transformative in terms of operational efficiency, with the store producing nearly 200 bowls in just 30 minutes, with complete reliability. With seven more Infinite Kitchens slated for opening in 2024, Sweetgreen is optimistic and anticipates the initiative to drive faster service times and reduce labor costs. The success of this model in high-traffic locations could give the company a significant competitive edge.
Concerns for Sweetgreen Stock
The company has been bearing the brunt of high expenses for some time. During the second quarter of 2024, food, beverage and packaging expenses were $49.9 million compared with $41 million reported in the prior-year quarter. The increase was driven by the 36 new restaurant openings and higher protein costs. The total cost of operations was $143.1 million, up 18% year over year. Increases in delivery fees, related to the increase in revenues through marketplace channel, credit card and online processing fees, and repair and maintenance expenses added to the upside. Going forward, the company remains cautious of an increase in commodity costs.
Conclusion
The company's focus on new restaurant openings, menu innovation and highly efficient Infinite Kitchen concept position it for long-term success. While costs are a concern, Sweetgreen's expansion into new markets, increased dinner sales and strong brand appeal suggest that it has the potential to overcome these challenges. For long-term investors, Sweetgreen offers promising growth and operational efficiency, making it a stock worth holding.
Zacks Rank & Key Picks
Sweetgreen currently carries a Zacks Rank #3 (Hold).
Texas Roadhouse has a trailing four-quarter earnings surprise of 0.4%, on average. TXRH’s shares have risen 77.4% in the past year. The Zacks Consensus Estimate for TXRH’s 2024 sales and EPS indicates 15.6% and 39.2% growth, respectively, from the year-earlier actuals.
Potbelly Corporation has a trailing four-quarter earnings surprise of 77.5%, on average. The stock has gained 7.7% in the past year. The Zacks Consensus Estimate for PBPB’s fiscal 2024 EPS implies 33.3% growth on 6.5% lower revenues from the year-ago levels.
El Pollo Loco Holdings has a trailing four-quarter earnings surprise of 21.6%, on average. LOCO’s shares have risen 55.1% in the past year. The Zacks Consensus Estimate for LOCO’s fiscal 2024 sales and EPS indicates 2% and 12.7% growth, respectively, from the prior-year figures.
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Here's Why You Should Retain Sweetgreen Stock in Your Portfolio Now
Shares of Sweetgreen, Inc. (SG - Free Report) have gained 23.6% in the past three months compared with the industry’s 6.3% growth. The company is benefiting from solid traffic and strategic pricing. Also, the focus on menu innovation and expansion efforts bode well. However, elevated expenses are a concern.
Growth Catalysts for SG Stock
Sweetgreen’s growth strategy is centered on two key pillars: menu innovation and restaurant expansion. The company opened four new restaurants in the second quarter, with a strong pipeline of new openings planned for the rest of 2024 and beyond. Impressively, its new cohort of restaurant openings, which include locations in Washington, DC, Chicago, and a new market in New Hampshire, are outperforming the existing fleet in terms of weekly revenues. By focusing on strategic real estate choices and investing in brand awareness, Sweetgreen has entered emerging markets like the Midwest, Texas and the Southeast. The company reported double-digit same-store sales growth in the region.
Image Source: Zacks Investment Research
Sweetgreen’s success is not just about expanding its footprint, it’s also about constantly innovating its menu to keep customers engaged. The launch of Caramelized Garlic Steak and protein plates has driven increased traffic and higher check sizes, particularly during dinner and weekends. During the second quarter, dinner accounted for 40% of Sweetgreen’s total sales, a 3% increase year over year. The company emphasizes creating craveable, high-quality offerings to build customer loyalty and attract new guests.
A standout feature of Sweetgreen’s expansion is the integration of its Infinite Kitchen concept, which debuted in Penn Plaza, New York. This innovation has been transformative in terms of operational efficiency, with the store producing nearly 200 bowls in just 30 minutes, with complete reliability. With seven more Infinite Kitchens slated for opening in 2024, Sweetgreen is optimistic and anticipates the initiative to drive faster service times and reduce labor costs. The success of this model in high-traffic locations could give the company a significant competitive edge.
Concerns for Sweetgreen Stock
The company has been bearing the brunt of high expenses for some time. During the second quarter of 2024, food, beverage and packaging expenses were $49.9 million compared with $41 million reported in the prior-year quarter. The increase was driven by the 36 new restaurant openings and higher protein costs. The total cost of operations was $143.1 million, up 18% year over year. Increases in delivery fees, related to the increase in revenues through marketplace channel, credit card and online processing fees, and repair and maintenance expenses added to the upside. Going forward, the company remains cautious of an increase in commodity costs.
Conclusion
The company's focus on new restaurant openings, menu innovation and highly efficient Infinite Kitchen concept position it for long-term success. While costs are a concern, Sweetgreen's expansion into new markets, increased dinner sales and strong brand appeal suggest that it has the potential to overcome these challenges. For long-term investors, Sweetgreen offers promising growth and operational efficiency, making it a stock worth holding.
Zacks Rank & Key Picks
Sweetgreen currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Zacks Retail-Wholesale sector are Texas Roadhouse, Inc. (TXRH - Free Report) , Potbelly Corporation (PBPB - Free Report) and El Pollo Loco Holdings, Inc. (LOCO - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Texas Roadhouse has a trailing four-quarter earnings surprise of 0.4%, on average. TXRH’s shares have risen 77.4% in the past year. The Zacks Consensus Estimate for TXRH’s 2024 sales and EPS indicates 15.6% and 39.2% growth, respectively, from the year-earlier actuals.
Potbelly Corporation has a trailing four-quarter earnings surprise of 77.5%, on average. The stock has gained 7.7% in the past year. The Zacks Consensus Estimate for PBPB’s fiscal 2024 EPS implies 33.3% growth on 6.5% lower revenues from the year-ago levels.
El Pollo Loco Holdings has a trailing four-quarter earnings surprise of 21.6%, on average. LOCO’s shares have risen 55.1% in the past year. The Zacks Consensus Estimate for LOCO’s fiscal 2024 sales and EPS indicates 2% and 12.7% growth, respectively, from the prior-year figures.