Sweetgreen, Inc. 2026 Q2 Earnings Call

Good afternoon, everyone. Speaking on today's call will be Jonathan Neman, co-founder and Chief Executive Officer, as well as Jamie McConnell, Chief Financial Officer. Both will be available for questions during the Q&A session following the prepared remarks. Today's call is being webcast live and recorded for replay. The earnings release is available on the Investor Relations section of Sweetgreen's website at investor.sweetgreen.com. I would like to remind everyone that the information under the heading "forward-looking statements," including in our earnings release, also applies to our comments made during the call. These forward-looking statements are based on information as of today, and we assume no obligation to publicly update or revise our forward-looking statements. We also direct you to our earnings release for additional information regarding our use of non-GAAP financial measures, including reconciliations of non-GAAP financial measures mentioned on the call with their corresponding GAAP measures.

Our earnings release can be found on our investor website. Now I will turn the call over to Jonathan to kick things off.

Thank you, Anthony. Good afternoon, everyone. I want to start by thanking our teams for staying focused, resilient, and disciplined through what continues to be a challenging operating environment. Before discussing our results, I want to take a moment to address two separate public health matters affecting the fresh produce and restaurant industries. The Cyclospora outbreak has been attributed to iceberg lettuce, which we do not use anywhere on our menu. We continue to monitor the situation closely and have no indication from our suppliers or public health authorities that Sweetgreen is connected to that outbreak. As Jamie will discuss shortly, the impact of this outbreak, including a range of recovery assumptions, is reflected in our updated outlook. In a separate and unrelated matter, a voluntary recall involving jalapenos was issued yesterday.

As an added precaution, we proactively removed and discarded all jalapenos from the supplier in the affected areas. Jalapenos are used in only 2 of our 15 dressings and nowhere else on our menu, representing a very small portion of our sales mix. Because the communication was issued only yesterday, it is too early to reasonably estimate any potential impact, and therefore, it is not reflected in our outlook. We will continue to uphold our high standards through rigorous food safety systems, operating procedures, and team training. Outside of the recent events, our results are not where they need to be. However, we know exactly where our opportunities are, ensuring every restaurant is consistently Rush Ready Before Peak during peak periods, increasing top-of-funnel awareness to bring more guests into the brand, and moving with greater speed to capture the margin opportunities we see across the business.

That said, we did see progress during the quarter, with comparable transaction trends improving sequentially each month, including flat transaction comps in June. This progress gives us confidence that our actions are beginning to have an impact and that we will get back to positive, sustainable transaction growth. Now turning to our results for the second quarter. Revenue was $192.7 million. Comparable restaurant sales declined by 6.2%. Restaurant level profit margin was 13.1%, and adjusted EBITDA was a loss of $0.2 million. We ended the quarter with 287 restaurants. We've made deliberate choices about what to prioritize now and what to sequence later so we can strengthen the core, grow transactions, rebuild AUVs, and improve restaurant-level cash flow. We're executing that plan with urgency and discipline across our five strategic priorities, which include operational excellence, food quality and menu innovation, brand relevance, personalized experiences, and disciplined, profitable investment.

Let me walk you through how this is showing up across the business. Starting with operational excellence, which begins with consistently delivering a great guest experience in every restaurant during every visit. Throughput is our top priority, and we think about it as a flywheel. It starts with strong, stable leadership, which drives staffing, deployment, and training decisions that put the right people in the right place at the right time, all in service of being Rush Ready Before Peak. We've recently seen this flywheel work, and we're doubling down on it. Over the past year, we've elevated our field leadership, improving head coach stability and driving greater accountability and execution. New York and Seattle show what this looks like in practice. New regional general managers raised the bar on throughput and hospitality, and both markets returned to positive transaction comps in the second quarter.

With strong leaders, clear priorities, and consistent routines, the business responds. Our restaurant scorecard and Rush Ready Before Peak Discipline give teams and field leaders real-time visibility into what matters: sales, throughput, guest satisfaction, food quality, and people. In June, we introduced a more structured process around throughput at our highest volume restaurants with weekly accountability built in and saw immediate improvement in both throughput and transactions. At these restaurants, frontline peak entrees prepared per hour rose from the low 50s in May to the low 60s in June. On our busiest days, our best restaurants surpassed 250 entrees an hour, which shows the opportunity ahead as we scale this process. Additionally, we redesigned our training programs for head coaches, kitchen leads, and core team members with a sharper focus on hospitality, throughput, and food quality.

Rollout begins now, and this is expected to further strengthen our teams, reduce turnover, and deepen our bench of leaders. Together, we believe we have the leadership and tools that get us back to sustainable transaction growth and a stronger, more profitable business. Moving to food quality and menu innovation. Real food made from scratch with high-quality ingredients remains at the center of everything we do. It drives our mission of building healthier communities by connecting people to real food that tastes great and makes you feel great. Starting with wraps. Wraps drove 200 basis points of comparable sales uplift, including about 500 basis points improvement in transactions, and demonstrated how we can bring our food philosophy to new formats and occasions. While overall comps didn't perform quite as strongly as our market tests indicated, wraps have maintained approximately 20% incidence, exceeding our expectations.

We intentionally introduced wraps at a more accessible entry price, giving guests a compelling value option while staying true to the quality and ingredients that define Sweetgreen. More importantly, wraps drove an increasing frequency, with more than half of guests who ordered a wrap returning within 30 days. Outperforming even our Harvest Bowl, which has historically been our most popular and highest retention menu item. Beyond wraps, we are building a more consistent menu calendar with a regular cadence of seasonal offerings, collaborations, and partnerships designed to give customers new reasons to visit and keep Sweetgreen top of mind all year long. We recently announced our collaboration with Fishwife, bringing together two culturally relevant brands that share an appreciation for high-quality ingredients, bold flavors, and modern food culture.

This fall, we'll welcome back our seasonal Brussels sprouts, along with a collaboration featuring a highly regarded chef that we're excited to unveil in the coming months. At the same time, we are just as focused on strengthening our core menu. One recent example is our enhanced Hot Honey Chicken Plate, featuring golden quinoa and napa cabbage slaw, which has delivered higher reorder rates since its relaunch. We believe plates represent a meaningful opportunity to broaden our dinner business, and we have an exciting pipeline of menu innovation over the coming quarters and into 2027. Strengthening the core also means ensuring guests get the quality, portions, and experience they expect at a compelling price.

We have not taken a price increase in over a year, and since 2019, our price increases have trailed broader restaurant industry inflation by more than 13 percentage points and grocery inflation by more than seven percentage points. Wraps have further expanded our range of accessible entry points without compromising the quality or generous portions customers expect from Sweetgreen. This has translated into improving trends in our lower income and Gen Z customers cohorts. Finally, we recently launched a redesigned create your own test that includes a protein in the base price, along with greater transparency around premium add-ons. The experience is easier to navigate and makes it simpler for customers to understand the value that Sweetgreen delivers. We expect to have more to share on the test results next quarter.

Together, this work is focused on making Sweetgreen more craveable, accessible, and relevant across more occasions. That leads directly to our next priority, brand relevance. Sweetgreen has always been shaped by meaningful relationships with farmers, chefs, and communities. Our opportunity is not to reinvent the brand, but to make what is already distinctive about Sweetgreen more visible to more people. Our latest brand health research shows that Sweetgreen resonates strongly with guests who are familiar with us. We continue to stand out for high-quality ingredients, food that makes you feel good, trust, and cultural relevance. We are also seeing frequency and reactivation growth among existing and lapsed guests. This shows up the most in our digital business, specifically our pickup channel, where comps were positive and accelerated each month of the quarter. However, we are not yet reaching enough potential guests.

Building broader awareness and consideration is an important opportunity to introduce more people to Sweetgreen, drive trial, and support transaction-led growth. We are evolving our media mix, placing greater emphasis on upper and middle funnel channels and more consistent ongoing storytelling. Going forward, we also see an opportunity to build stronger local marketing capabilities around our restaurants and pursue culturally relevant partnerships that give more people new ways to discover and engage with Sweetgreen. The launch of wraps demonstrated the potential of this approach. Wraps generated our highest social engagement to date, supported by over 1,000 micro-influencers who brought the launch into local communities and relevant cultural conversations at scale. We now have an opportunity to build on that engagement, broaden awareness, and convert more of that interest into trial.