Business context and reporting period
Sweetgreen, Inc. operates company-owned fast-casual restaurants. This Form 10-Q covers the 13 weeks ended September 24, 2023 (Q3) and the 39 weeks ended that date, compared with the corresponding 2022 periods. At quarter-end, the company operated 220 restaurants in 18 states and Washington, D.C.
Financial and operating performance
| Metric | Q3 2023 | Q3 2022 | 39 weeks 2023 | 39 weeks 2022 |
|---|---|---|---|---|
| Revenue | $153.4 million | $124.0 million | $431.0 million | $351.5 million |
| Net loss | $25.1 million | $51.0 million | $86.0 million | $141.2 million |
| Restaurant-level profit / margin (non-GAAP) | $29.1 million / 19% | $19.9 million / 16% | $77.1 million / 18% | $56.5 million / 16% |
| Adjusted EBITDA / margin (non-GAAP) | $2.5 million / 2% | $(7.2) million / (6)% | $(0.9) million / approximately 0% | $(32.0) million / (9)% |
- Q3 same-store sales increased 4% versus 6% in Q3 2022; year-to-date growth was 4% versus 17%. Management attributed current-period same-store growth primarily to 5% menu pricing, partly offset by a 1% decline in traffic/mix.
- Q3 AUV was $2.905 million, essentially unchanged from $2.892 million. Total digital revenue was 58% of revenue (60% prior year); owned digital was 37% (40%).
- Q3 restaurant costs were 81% of revenue in aggregate: food, beverage and packaging 27%; labor 29%; occupancy 9%; other restaurant costs 16%.
- Cash and cash equivalents were $274.7 million at September 24, 2023, down from $331.6 million at December 25, 2022. Year-to-date operating cash flow was positive $17.6 million; investing cash outflow was $79.4 million, primarily reflecting $74.9 million of property and equipment purchases. Cash, cash equivalents and restricted cash declined $56.9 million.
- No revolving credit borrowings were outstanding. The $45 million facility had $43.1 million available after the letter of credit. Operating lease liabilities totaled $302.6 million, including current and non-current portions.
Material changes versus prior comparable periods
- Revenue rose 24% in Q3 and 23% year to date, driven mainly by restaurant expansion: 54 net openings during or after the comparable prior-year Q3 and 70 during or after the comparable year-to-date period. Sweetgreen reported 15 net openings in Q3 and 34 year to date.
- Profitability improved, with the Q3 net loss narrowing by $26.0 million and year-to-date net loss narrowing by $55.2 million. Lower general and administrative costs and lower restructuring charges contributed; higher sales and improved labor efficiency also supported restaurant-level margins.
- General and administrative expense fell 14% in Q3 and 23% year to date, including lower stock-based compensation. Depreciation and amortization rose 32% and 28%, respectively, alongside restaurant and technology investment.
- Year-to-date operating cash flow improved by $43.3 million from the prior-year outflow, but capital investment remained substantial.
Outlook, management commentary, risks and unusual items
- Sweetgreen plans to integrate its Infinite Kitchen into more new restaurants in fiscal 2024 and anticipates 23–28 net new openings that year. The filing does not provide a clear broader revenue or earnings forecast.
- Management cited softening consumer demand, variable return-to-office and hybrid-work patterns, inflation and wage pressure, commodity and supply-chain exposure, and possible customer sensitivity to further menu-price increases. A packaging-supplier disruption raised costs during the first half of 2023; chicken and fish costs eased in Q3.
- Delivery and marketplace channels involve third-party fees and can pressure margins. Digital sales mix declined year over year, and management noted that seasonality has become less predictable.
- Year-to-date results included $6.9 million of employee retention tax credits ($1.8 million in labor costs and $5.1 million in G&A), which benefited reported expenses. Q3 restructuring charges were $0.8 million; year-to-date charges of $6.4 million included a $4.3 million non-cash impairment tied to the vacated former support center.
- Sweetgreen expected to pay approximately $10.2 million in Q4 2023 for a Spyce acquisition purchase-price true-up. Contingent consideration was $22.9 million at quarter-end.
- Management said existing cash and available revolver capacity should fund operating, lease, capital and working-capital needs for at least 12 months. The company was in compliance with facility covenants. Ordinary-course legal matters were not expected to have a material effect, though adverse outcomes could be harmful.
Most important facts for investors to verify
- Whether same-store sales and traffic stabilize as menu pricing and consumer demand evolve.
- Whether restaurant growth and Infinite Kitchen deployment deliver expected returns while controlling capital spending and operating costs.
- How much of improved losses and cash generation is durable versus attributable to lower stock compensation, restructuring comparisons, tax credits and interest income.
- Cash burn, remaining liquidity, lease commitments and the planned Spyce true-up payment.
- Whether delivery-channel mix, inflation, labor costs, supply disruptions and return-to-office trends affect margins and sales.
Restaurant-level profit and Adjusted EBITDA are non-GAAP measures; they should be considered alongside GAAP results and cash flows.