Did Sweetgreen Just Hit Rock Bottom?

Over the last year, Sweetgreen's (NYSE: SG) results have gone from troubling to catastrophic.

The stock was riding high in late 2024 after posting strong growth, but in the last year or so, the fast casual salad chain's business has collapsed, and the stock has tumbled. It's now down 85% from its peak a year and a half ago.

The first-quarter results show how bad things have gotten for Sweetgreen. Comparable sales plunged 12.8% even as the company was lapping a quarter in which the LA wildfires hurt sales in its Southern California stores.

Overall revenue fell 2.9% to $161.5 million, which missed estimates at $163.6 million. Sweetgreen is supposed to be a growth stock, yet same-store sales are down double digits, and revenue is falling, even as it opens new stores. Average unit volume, or annual sales per store, fell from $2.91 million in the quarter a year ago to $2.57 million. Its customers are disappearing.

Sweetgreen's bottom-line numbers weren't any better. Restaurant-level profit margin fell from 17.9% to 10%, and its generally accepted accounting principles (GAAP) operating loss widened from $28.5 million to $34.3 million. The company reported a net profit, but that was only because of a gain on the sale of Spyce, the business that includes the Infinite Kitchen, though Sweetgreen retained the rights to use it.

For a quarter without any major economic shock, the numbers were terrible. However, the stock actually rose 2% on the news as management indicated the business was turning a corner.

Image source: Sweetgreen.

One reason for hope

Despite the weak numbers, management's guidance showed that the worst part of its retrenchment may be over. For the full year, the company expects a same-store sales decline of 2%-4%, which basically implies flat comparable sales over the remainder of the year after the 12.8% decline in the first quarter.

The headwinds from its transition away from its Sweetpass+ subscription program to SG Rewards will begin to abate in the second quarter, and management was optimistic about its wraps, which it launched nationally last week after testing them starting in February. In the first quarter, it also faced a difficult comparison with the launch of Ripple Fries last year.

The wraps come at a lower price point than its bowls, which is key as consumer spending has been pressured and Sweetgreen has faced complaints about its high prices and lack of value. Management said that wraps "drove incremental traffic from new and returning guests, helped reengage lapsed customers, and showed strong repeat behavior." It also noted that momentum improved in April, though comparable sales were still down 8%. For the second quarter, the company is targeting comps to be down about 4%.

Can Sweetgreen turn it around?

Management maintained its full-year guidance numbers from the fourth-quarter report. While the forecast decline of 2%-4% isn't anything to celebrate, the company does see adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) improving to a profit of $1 million-$6 million, up from a loss in 2025.

Still, if the company can hit that guidance, it will signal that the business is at least moving in the right direction, and that's good news for investors. At this point, if there's a silver lining with the stock, it's that it's already fallen so far that the upside potential is there if it can mount a turnaround.

We'll have to wait a few more quarters to see if the new wraps pay off, but if comparable sales return to positive territory before the end of the year, the stock could rip higher.

Jeremy Bowman has positions in Sweetgreen. The Motley Fool recommends Sweetgreen. The Motley Fool has a disclosure policy.