The Market Has Punished Sweetgreen -- Is That Your Buying Opportunity?

Wall Street has not been kind to Sweetgreen (NYSE: SG). Shares of the restaurant chain have fared poorly over the past year. The stock is down nearly 40% in the last 12 months as of June 26.

Despite that, it's showing signs of a recovery. Year to date, shares have rebounded 35% through June 26. Even so, the stock remains well below the 52-week high of $16.70 reached last July.

So does it make sense to buy shares now? Answering that question requires digging deeper into the company.

Image source: Getty Images.

Sweetgreen's struggles

Sweetgreen's stock fell on hard times as persistent inflation put pressure on consumer wallets, making its pricey menu items no longer an option for many. This is evident in the company's fiscal first-quarter results (ended March 29). Restaurants that have been open at least 13 months experienced an 11% drop in foot traffic compared to a year ago.

Fewer customers translated into a 3% year-over-year decline in Q1 sales to $161.5 million. Sweetgreen mitigated the damage by leaning into its loyalty program customers. Q1 revenue from its digital channel, where the company lumps loyalty program sales, totaled $62.8 million, up substantially from $53 million in the prior year.

While Sweetgreen's digital sales were a bright spot, the company's struggles with profitability only worsened in the face of declining customer numbers. Its Q1 operating loss of $34.3 million was an increase from the previous year's loss of $28.5 million. It exited the quarter with net income of $125.8 million compared to a net loss of $25 million in 2025 because it sold its ambitious kitchen automation business, Infinite Kitchen, to reduce costs and focus on core operations.

Sweetgreen's rebound efforts

The company is now pivoting to cheaper menu items to attract value-conscious consumers. As part of this initiative, it added wraps to the menu in May, and early tests showed it improved customer acquisition.

It's also working to strengthen kitchen operations to enable faster throughput and improve operational efficiency, which should reduce costs. The company's efforts contributed to share price gains this year.

If Sweetgreen succeeds in driving customer growth, it will have a runway for business expansion. At the end of 2025, it operated 281 restaurants across 24 states, giving it plenty of additional states to expand into. The company opened four locations in Q1 and expects to reach about 13 this year. That's significantly less than the 35 restaurants opened in 2025, but the reduction is intentional to manage costs.

Sweetgreen's efforts to strengthen its business and grow its customer base are promising, although I bought its stock because I like the food. As famed investor Peter Lynch recommended, invest in what you know. I also believe in the company's mission to provide nutritious cuisine and support sustainable farming practices.

The success it's having with digital sales and the loyalty program demonstrates the company knows how to retain customers. Its menu changes show it can adapt to shifting macroeconomics and consumer struggles with inflation. These are all encouraging signs of Sweetgreen's potential recovery and make it a worthwhile consumer stock to consider.

Robert Izquierdo has positions in Sweetgreen. The Motley Fool recommends Sweetgreen. The Motley Fool has a disclosure policy.