Sweetgreen swings to gain despite earnings disappointment (NYSE:SG)

Sweetgreen (NYSE:SG) staged a major comeback on Friday, rebounding to a modest gain after falling by as much as 13% after the market open.

The restaurant chain posted a miss on top and bottom lines for the fourth quarter. Same store sales growth of 4% also missed the consensus expectation of a 6% jump while the pace of new restaurant openings also slowed. The reported loss from operations was $47.7M in the quarter, essentially flat from the prior year period.

“Since we went public a little more than a year ago, the macroeconomic condition we operate in has gotten more complicated and unpredictable,” CEO Jonathan Neman admitted. “And while the operating environment was certainly challenging, we know that our execution was not up to our standard.”

Forecasts also fell short of the standard anticipated by analysts. Management offered a Q1 forecast of between $124M to $127M in revenue, short of the consensus estimate set at $133.9M. A projected EBITDA loss of $13M to $15M for the first quarter also came short of the $11.9M consensus expectation. For the full year, a forecast of $575M to $595M came short of the $629.3M analyst consensus as did an EBITDA loss forecast between $10M and $20M in comparison to a $10.6M consensus.

However, Neman focused on efficiency improvements as the company looks to stem losses and reach a path to profitability.

“In light of the macro uncertainty we face in the near-term, we’ve adjusted our strategy with a focus on more disciplined capital efficient growth,” he told analysts. “The changes I ran through today, both operationally and strategically are reflective of our commitment to all of our stakeholders to deliver profitability in 2024.”

The focus on the bottom line appeared to promote some optimism among analysts that noted near term choppiness could give way to significant upside if operational improvements are effective.

“We do believe this change reflects a renewed focus on ops, re-orienting store analytics for the post- Covid new normal, and excitement around what Spyce could mean in future store growth – all of which give us greater confidence in the brand reaching profitability in 2024,” Citi analyst Jon Tower advised clients.

He nonetheless maintained a Neutral rating and trimmed his price target to $10 from a prior $13.

Shares of Sweetgreen (SG) rose 1.4% in the waning minutes of Friday’s trading, up a double-digit percentage from the intraday nadir, though down from the intraday high on a volatile day. Trading volume trended near more than twice the daily average. Short interest in Sweetgreen (SG) stands at 10.42%, according to Seeking Alpha data.

Read the earnings call transcript.