SG Q1 Earnings Call: Menu Innovation and Loyalty Investments Amid Consumer Slowdown

Casual salad chain Sweetgreen (NYSE: SG) beat Wall Street’s revenue expectations in Q1 CY2025, with sales up 5.4% year on year to $166.3 million. On the other hand, the company’s full-year revenue guidance of $750 million at the midpoint came in 1.8% below analysts’ estimates. Its non-GAAP loss of $0.13 per share was 27.2% above analysts’ consensus estimates.

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StockStory’s Take

Sweetgreen’s Q1 results were shaped by ongoing investments in menu innovation, the rollout of new restaurant formats, and an intensified focus on operational execution. CEO Jonathan Neman highlighted external headwinds, including adverse weather events and shifting holiday patterns, but emphasized that the company’s Infinite Kitchen and sweetlane formats contributed to operational efficiencies, while menu launches such as Ripple Fries boosted customer engagement. Management acknowledged that the same-store sales decline reflected both traffic softness and mixed results in core urban markets, especially as consumers became more selective with discretionary spending.

Looking ahead, management’s full-year guidance factors in a more challenging macro environment and the impact of tariffs on build-out costs and packaging. CFO Mitch Reback cited “a dynamic environment” and noted that April sales trends were softer than typical seasonal patterns, citing shifting consumer sentiment and tariff announcements. The company plans to lean on its newly launched SG Rewards loyalty program, expanded menu offerings, and a continued rollout of Infinite Kitchen restaurants to counteract these headwinds. Leadership expressed confidence in the long-term strategy but acknowledged that near-term volatility could persist.

Key Insights from Management’s Remarks

Sweetgreen’s management addressed both positive strides and ongoing challenges in the first quarter, focusing on operational adjustments and strategic initiatives to support future growth.

• Menu innovation impact: New offerings like Ripple Fries and collaborations such as the upcoming KBBQ menu with COTE Korean Steakhouse were cited as direct drivers of increased ticket averages and customer frequency, supporting a refreshed brand perception.
• Restaurant format advances: The Infinite Kitchen and sweetlane formats drove operational efficiency, higher digital sales, and improved restaurant-level margins, particularly in new and emerging markets. Management noted that these formats continue to outperform traditional units in cash-on-cash returns.
• Geographic and market variation: While markets like Texas and Colorado saw double-digit same-store sales growth, core urban regions—Los Angeles, New York, Boston, and Washington, D.C.—experienced persistent softness, with management attributing some of this to lingering effects from regional events and changing consumer behaviors.
• Loyalty program relaunch: The nationwide rollout of SG Rewards resulted in 20,000 new digital customers per week, broadening Sweetgreen’s access to customer data and enabling more targeted marketing campaigns. Early adoption rates were described as “very encouraging.”
• Tariff and cost management: Management outlined efforts to mitigate tariff-related cost pressures, particularly for packaging and Infinite Kitchen components sourced from China. Initiatives include supply chain diversification and pre-purchasing materials to limit near-term exposure, with longer-term cost reductions anticipated as sourcing shifts progress.

Drivers of Future Performance

Management’s outlook for the remainder of the year is anchored in driving traffic through menu and technology innovation, while navigating macroeconomic uncertainty and external cost pressures.

• Menu and loyalty initiatives: Sweetgreen aims to increase visit frequency and attract new customers with limited-time menu offerings, seasonal rotations, and expanded use of the SG Rewards program, which management believes will become a key lever for traffic and retention.
• Expansion of innovative formats: Continued investment in Infinite Kitchen and sweetlane locations is expected to drive improved operational efficiency and higher digital sales, supporting restaurant-level margin expansion despite cost headwinds.
• Tariff and macro uncertainty: Management highlighted risks associated with consumer sentiment, ongoing tariff impacts on build-out and packaging costs, and operational challenges in legacy urban markets. The company cautioned that a sustained slowdown in discretionary spending and further cost inflation could pressure results.

Top Analyst Questions

• Jon Tower (Citigroup): Asked whether tariffs would alter plans for Infinite Kitchen rollouts; management replied that returns remain attractive and deployment strategy is unchanged despite higher build-out costs.
• Sara Senatore (Bank of America): Inquired about regional performance differences; management noted ongoing softness in Los Angeles and a recent downturn in Washington, D.C., attributed to lingering wildfire impacts and changing consumer patterns.
• Zach Ogden (TD Cowen): Sought clarity on the cadence of same-store sales recovery; management indicated that Q2 would remain challenged but expects seasonal menus and loyalty initiatives to improve trends in the second half of the year.
• Sharon Zackfia (William Blair): Queried value perceptions and operational challenges in core markets; management pointed to the need for a return to more frequent seasonal menus and greater discipline in digital order execution.
• Christine Cho (Goldman Sachs): Asked about SG Rewards metrics and data usage; management reported strong weekly signups and highlighted plans to leverage customer data for targeted marketing and menu development.

Catalysts in Upcoming Quarters

In the coming quarters, our team will closely monitor (1) the impact of new menu launches, including the KBBQ collaboration and seasonal offerings, on guest frequency and sales trends; (2) adoption and engagement levels of the SG Rewards loyalty program as a driver of digital and in-store traffic; and (3) the scale-out of Infinite Kitchen and sweetlane formats, especially their effect on margin and throughput. The company’s ability to offset tariff and macroeconomic pressures through operational discipline and customer engagement tactics will also be an important area of focus.

Sweetgreen currently trades at a forward EV-to-EBITDA ratio of 51.7×. In the wake of earnings, is it a buy or sell? See for yourself in our free research report.

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