Sweetgreen, Inc. 10-Q Summary: Q1 2026
Business Context and Reporting Period
This report covers the thirteen weeks ended March 29, 2026. Sweetgreen, Inc. operates as a mission-driven, next-generation restaurant brand with 285 company-owned locations across 24 states and Washington, D.C. The company operates as a single reportable segment. During the quarter, the company opened 4 net new restaurants and completed the sale of its "Spyce" business and "Infinite Kitchen" technology assets to Wonder Group, Inc.
Key Financial Metrics
| Metric | Q1 2026 | Q1 2025 |
|---|---|---|
| Revenue | $161.5 million | $166.3 million |
| Net Income (Loss) | $125.8 million | ($25.0 million) |
| Loss from Operations | ($34.3 million) | ($28.5 million) |
| Operating Cash Flow | ($17.2 million) | ($13.1 million) |
| Cash and Equivalents (End of Period) | $156.8 million | $89.2 million |
| Debt | $0 (No outstanding debt) | $0 |
| Same-Store Sales Change | -12.8% | -3.1% |
Material Changes vs. Prior Period
- Revenue Decline: Revenue decreased 2.9% year-over-year, driven by a 12.8% decline in same-store sales. This was attributed to an 11.2% drop in traffic (impacted by weather and the prior year's "Ripple Fries" launch) and a 2.3% decrease in product mix due to promotional activity and the transition to the SG Rewards loyalty program.
- Profitability Surge: The company reported a net income of $125.8 million, a reversal from a $25.0 million loss in the prior year. This is primarily due to a one-time pre-tax gain of $160.6 million from the sale of the Spyce business. Excluding this gain, the company reported an operating loss of $34.3 million.
- Cost Pressures: Restaurant operating costs increased 6.4% to $145.3 million. Food, beverage, and packaging costs rose to 29.0% of revenue (from 26.5%), and labor costs rose to 31.4% of revenue (from 28.9%), driven by wage inflation and deleverage from lower sales volumes.
- Expense Reduction: General and administrative expenses decreased 23.7% to $29.3 million, largely due to a $4.4 million reduction in stock-based compensation expense.
Guidance, Outlook, and Risks
- Outlook: Management expects approximately 13 net new restaurant openings for fiscal year 2026, with about half featuring Infinite Kitchen units. The company anticipates elevated produce prices and fuel surcharges in Q2 2026 due to adverse weather.
- Liquidity: Cash and cash equivalents increased to $156.8 million, bolstered by $100 million in cash proceeds from the Spyce sale. Management believes current resources are sufficient for at least the next 12 months.
- Risks: Key risks include the impact of tariffs on supply chain and build-out costs, ongoing military conflicts affecting macroeconomic conditions, and the shift in sales mix toward higher-cost delivery channels (Marketplace and Native Delivery). The company also faces risks related to labor shortages and inflation.
- Unusual Items: The $160.6 million gain on disposal of business is a non-recurring item. Additionally, the company recorded $636,000 in impairment and closure costs and $505,000 in restructuring charges.
Investor Verification Checklist
- Spyce Transaction Details: Verify the terms of the ongoing licensing and supply agreements with Wonder Group regarding the Infinite Kitchen technology post-sale.
- Traffic Trends: Monitor same-store sales and traffic metrics in subsequent quarters to determine if the 12.8% decline is a temporary weather-related anomaly or a structural shift in consumer behavior.
- Margin Recovery: Assess whether the company can successfully offset rising food and labor costs through menu price increases without further depressing traffic.
- Capital Allocation: Review the deployment of the $100 million cash proceeds from the Spyce sale against the projected capital expenditure plan for new store openings.
- Debt Status: Confirm the company's decision not to renew its revolving credit facility and its reliance on cash reserves for liquidity.