Why Sweetgreen Stock Was Wilting Today

Source The Motley Fool

Shares of Sweetgreen (NYSE: SG) took a dive today, as it was one of several restaurant stocks to react negatively to President Trump's "Liberation Day" tariff announcement last night.

On a day when the S&P 500 (SNPINDEX: ^GSPC) fell 4.8%, Sweetgreen finished down 12%.

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A Sweetgreen salad bowl.

Image source: Sweetgreen.

What's Sweetgreen's tariff exposure?

Though Sweetgreen sources most of its ingredients domestically, it does import some food products from outside the U.S., including Mexico, and counts on components from China for its Infinite Kitchen systems.

However, Sweetgreen and its restaurant peers may be more exposed to any weakness in consumer spending that results than from the impact of the tariffs directly. After all, consumer confidence has been rapidly falling, and the tariffs could lead to a recession, which tends to hit restaurant stocks hard, as they are dependent on discretionary spending. Consumers can choose to eat food from the grocery store instead, or bring their own lunches into work.

Can Sweetgreen recover?

Sweetgreen stock had tumbled earlier in the year, as the company gave disappointing guidance, due in part to the impact of the wildfires in Los Angeles. However, its investments in the Infinite Kitchen, an automated system it's deploying to more restaurants, could help give it an advantage over other restaurant chains by helping it save on labor.

Ultimately, the tariffs shouldn't disrupt Sweetgreen's long-term growth path. It's a unique business as the leader in the fast-casual salad space, and it has a long runway of growth ahead of it. While the tariffs and any resulting economic headwinds could present a setback, they shouldn't derail the company's growth plans.

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

Disclaimer: For information purposes only. Past performance is not indicative of future results.
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