CAVA's sales outlook rises. Why is the profit upgrade so small?
New restaurants are driving strong growth, but opening costs and pressure on restaurant margins leave less of the gain reaching profit.
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CAVA Group, Inc.
CAVA news and analysis covering restaurant sales, traffic, margins, earnings forecasts, expansion spending and cash flow.
- Ticker
- CAVA
- Exchange
- XNYS
- SEC CIK
- 0001639438
CAVA Group, Inc. operates a Mediterranean fast-casual restaurant chain selling customizable bowls, pitas, dips and drinks. It also produces dips, spreads and dressing bases for its restaurants and sells packaged products through grocery stores. The company is based in Washington, D.C., and its shares trade as CAVA on the New York Stock Exchange.
Fiscal 2026 ends December 27. The first quarter contains 16 weeks; the other quarters contain 12 weeks. The third quarter ended October 4, with 500 restaurants after 24 openings during the quarter.
Financial record
| Measure | Q3 2025 | Q3 2026 | Year to date 2026 |
|---|---|---|---|
| Restaurant revenue | $289.8 | $353.7 | $1,153.5 |
| Group revenue, GAAP | $292.2 | $356.4 | $1,163.1 |
| Restaurant-level profit | $71.2 | $82.7 | $285.4 |
| Restaurant-level margin | 24.6% | 23.4% | 24.7% |
| Net income, GAAP | $14.7 | $13.2 | $59.8 |
| Diluted EPS, GAAP | $0.12 | $0.11 | $0.51 |
| Adjusted EBITDA | $40.0 | $42.3 | $158.8 |
| Operating cash flow | $45.6 | $47.1 | $181.6 |
| Property and equipment spending | $44.3 | $54.8 | $144.5 |
| Free cash flow | $1.4 | ($7.7) | $37.1 |
Quarterly cash figures are calculated by subtracting the original 28-week totals from the 40-week totals in the two earnings reports. Free cash flow is operating cash less property and equipment spending. Year-to-date free cash flow improved from $23.3 million in 2025.
Restaurant-level profit is a segment measure before corporate costs, depreciation, amortization and pre-opening expenses. Adjusted EBITDA removes interest, taxes, depreciation, amortization, equity compensation including applicable payroll taxes, other income or expense, impairment and disposal costs, and executive transition costs. Pre-opening expenses remain included in adjusted EBITDA.
Expectations through the year
| Measure | February 24 | May 19, reaffirmed August 11 | November 4 |
|---|---|---|---|
| Net new restaurants | 74 to 76 | 75 to 77 | 76 to 78 |
| Comparable sales growth | 3% to 5% | 4.5% to 6.5% | 6% to 7% |
| Restaurant-level margin | 23.7% to 24.2% | 23.7% to 24.3% | 23.7% to 24.0% |
| Pre-opening costs | $19.5 to $20.0 | $22.0 to $22.5 | $28.5 to $29.5 |
| Adjusted EBITDA | $176 to $184 | $181 to $191 | $184 to $189 |
The November adjusted EBITDA midpoint is $186.5 million, compared with $186 million in August. The midpoint of expected pre-opening costs rose by $6.75 million. Actual pre-opening expense was $8.4 million in Q3, up from $4.9 million a year earlier, as more restaurants were under construction and the company invested more in their openings.
Restaurant trends
Comparable sales rose 9.7% in Q1, 9.0% in Q2 and 3.1% in Q3. The traffic component slowed from 6.8% to 5.3% to 0.1%, while Q3 prices and product mix contributed 3.0%. Traffic measures entrées ordered, including digital orders. The chain ended Q3 with 500 restaurants, compared with 415 a year earlier.
CAVA attributes about 1.5 percentage points of quarterly comparable-sales pressure to Cyclospora and broader fresh-produce concerns, while stating that no ingredients in its supply chain were implicated. The restaurant margin also reflected higher labor investment, delivery fees and repairs. Food costs benefited from expected tariff recoveries and the absence of prior-year tariffs, without a separately disclosed recovery amount.
The number of restaurants increased by 61 net during the first 40 weeks: 62 opened and one permanently closed. New restaurants remain the main source of revenue growth. The next results will show how sales and margins develop as these locations mature and opening costs are absorbed.
Cash, financing and capital allocation
At October 4, CAVA held $297.9 million in cash and equivalents and $130.0 million in fixed-income investments. Its $150 million revolving facility was undrawn, with $149.1 million available after letters of credit. The facility was expanded in March 2026 and matures March 20, 2031. Operating lease liabilities were $536.9 million, separate from bank borrowing.
The board approved a $100 million buyback authorization on September 17, announced the following day. It expires September 17, 2027. The current report says no shares had been purchased under the program through the report date.
CAVA also holds convertible notes in Hyphen Technologies, which develops automated food-production lines. It invested an additional $5 million after a milestone in Q1 2026, bringing the notes' October fair value to $10.7 million. The company is testing the technology in its digital business.
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