Why Sweetgreen Stock Fell 27% in July
Key Points
Sweetgreen stock plunged on news of a lettuce-related cyclospora outbreak.
The company was not directly connected to the outbreak.
Thursday's earnings report could be a turning point for Sweetgreen.
- 10 stocks we like better than Sweetgreen ›
Shares of Sweetgreen (NYSE: SG) fell sharply in July, primarily due to the cyclospora outbreak linked to lettuce from Taylor Farms.
Though Sweetgreen does not use iceberg lettuce, the ingredient associated with the outbreak, the fast-casual salad chain still experienced a sales downturn due to fears about the outbreak and its focus on salads.
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As a result, the stock fell 27% for the month according to data from S&P Global Market Intelligence.
As you can see from the chart below, the stock tumbled in mid-July and stayed down from there.
SG data by YCharts
What happened with Sweetgreen
The biggest move for Sweetgreen last month came when the cyclospora outbreak was made public on July 14, and the stock plunged 14.3% on the news.
A few days later, the stock bounced back on reports that Taylor Farms, which supplies Taco Bell, was the source of the outbreak. However, the recovery was not sustained as market fears persisted. According to data from Placer.ai, a location intelligence platform, foot traffic at Sweetgreen was down for about a week after the first announcement before starting to recover. On July 24, the FDA also expanded its investigation to four new states, indicating that the outbreak was still spreading.
The drumbeat of negative news seemed to weigh on the stock as Sweetgreen continued to slide toward the end of the month. The news may also have stymied momentum in the business following the national rollout of wraps in May. However, investors will soon get an update on that, as the company will report second-quarter earnings after hours on Thursday.
Image source: Sweetgreen.
What's next for Sweetgreen
Looking ahead to the report, analysts expect revenue to increase 5% to $194.9 million, representing a return to growth after a decline in the first quarter. On the bottom line, they expect its adjusted loss per share to widen from $0.08 to $0.12.
According to Placer.ai, Sweetgreen's foot traffic rose 22% in the second quarter, which includes new stores, and that should bode well for the report. Additionally, the company expects comparable sales to stabilize after falling 12.8% in the first quarter.
Sweetgreen stock is down 86% from its peak in late 2024, and that's deserved. But the company still has a lot of growth potential with new stores, and if it returns to comparable sales growth, which seems likely, the stock could pop. The second-quarter report could mark the beginning of the turnaround.
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Jeremy Bowman has positions in Sweetgreen. The Motley Fool recommends Sweetgreen. The Motley Fool has a disclosure policy.
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