Is Sweetgreen a Millionaire-Maker Stock?

Sweetgreen (NYSE: SG), the fast casual restaurant chain specializing in salads and warm bowls, went public at $28 per share on Nov. 18, 2021. It opened at $52 on the first day, reached a record high of $53 the following day, but now trades at around $9.

Sweetgreen initially impressed investors with its rapid same-store sales growth and ambitious expansion plans, but its growth eventually sputtered out. Let's see why it disappointed the market, and if it might bounce back in the future and deliver millionaire-making gains.

Image source: Getty Images.

What happened to Sweetgreen?

Sweetgreen, which was founded in 2006, had already expanded from its first restaurant in Washington, D.C., to 130 locations across 13 states before its public debut. At the time, it was already serving 1.35 million customers and generating more than two-thirds of its sales from digital channels. It still owns and operates all of its stores rather than franchising them.

Sweetgreen carved out a niche in the fast-casual space with its health-conscious offerings, and its same-store sales, average unit volume (AUV, or average annual revenue per restaurant), and total revenue initially grew by double digits as it opened dozens of new stores per year.

Data source: Sweetgreen. *Adjusted for temporary COVID-19 closures in 2020.

Unfortunately, that growth spurt ended over the past three years as inflation drove up its prices, more people worked remotely and ate lunch at home (instead of at their offices, which were closer to many of Sweetgreen's stores). Many consumers also thought its salads and bowls were overpriced, and that they were being nickel-and-dimed for additional toppings and customizations.

Sweetgreen then fell into the trap of opening more stores to boost revenue, but those new stores merely drove up its costs while failing to boost its AUV or same-store sales. Its turnaround efforts -- including an ill-fated attempt to automate all its stores with robots and increase portion sizes to attract more customers -- also backfired, crushing its margins. That's why the company has remained unprofitable ever since its public debut.

Is Sweetgreen a millionaire-maker stock?

For 2026, Sweetgreen expects that pain to continue with a 2%-4% decline in same-store sales. Analysts expect its total revenue to rise 4%, but new store openings will entirely drive that growth. Sweetgreen's stock only trades at 1.4 times this year's sales, but it deserves that discount because there aren't any catalysts on the horizon.

Sweetgreen is trying to stabilize its business by diversifying its menu and simplifying its pricing, but those efforts probably won't stop the bleeding. Therefore, I doubt its stock will revisit its all-time highs -- or deliver multibagger, millionaire-making gains -- within the next decade.

Leo Sun has no position in any of the stocks mentioned. The Motley Fool recommends Sweetgreen. The Motley Fool has a disclosure policy.