Sweetgreen, Inc.

I'd like to remind everyone that the information under the heading, Forward-Looking Statements, included in our earnings release, also applies to our comments made during the call. These forward-looking statements are based on information as of today, and we assume no obligation to publicly update or revise our forward-looking statements. We also direct you to our earnings release for additional information regarding our use of non-GAP financial measures, including reconciliations of non-GAP financial measures mentioned on the call with their corresponding GAP measures. Our earnings release can be found on our investor website. And now, I'll turn the call over to Jonathan to kick things off.

Thank you, Rebecca, and good afternoon. For the past 18 years, we have been building a generational brand, one that reimagines fast food to be healthy, craveable, and rooted in the highest standards of sourcing. The brand resonates broadly across geographies, demographics, and day parts, reinforcing our significant white space ahead and our long-term potential. For the second quarter, we reported sales of $185.6 million and a same-store sales decline of 7.6%. Restaurant level margin for the quarter was 18.9%, and we posted an adjusted EBITDA of $6.4 million. Let me be clear. We are not satisfied with the results we're reporting today. These results reflect the convergence of several external headwinds and internal actions, which were a more cautious consumer environment starting in April, lapping a tough comparison with last year's successful stake launch and the transition of our new loyalty program at the beginning of the quarter. I want to take a moment to provide more context around these dynamics and the steps we're taking in response. In the second quarter, we operated in a subdued industry backdrop, particularly in several of our largest urban markets. To address this, we've made thoughtful changes to enhance our value proposition, including increasing our chicken and tofu portioning by 25%, updating our chicken and salmon recipes to improve taste and quality, and addressing price perception through strategic LTO pricing, menu board architecture, and loyalty-exclusive $13 menu bowl drops. These initiatives are already driving an impact in the third quarter. Our summer menu, which launched July 7th, is mixing at 15% of all entrees, and one in three customers who tried a seasonal entrée returned within two weeks. We've also seen a meaningful uptick in guest satisfaction with a 30% improvement in feedback related to our new protein portion sizes. We are focused on elevating the quality and freshness of every item we serve by reducing hold times and improving consistency. To support this, we're thoughtfully evolving our menu strategy to balance innovation with operational excellence. Looking ahead, we have two more seasonal menus slated in 2025 and are planning at least eight seasonal or LTO moments in 2026. We remain focused on strengthening our value proposition and driving frequency through both menu innovation and our re-imagine loyalty program, which launched at the start of the second quarter. The transition to SG Rewards created around 250 basis point headwind to our second quarter same-store sales. This was driven by two factors. First, deferred revenue recognition tied to the structure of the new program. And second, a fall-off in revenue from a small but highly important cohort of former SweetPath Plus members following the discontinuation of the subscription program. We believe these impacts from the loyalty program are temporary. Active membership in the program is growing and 90-day frequency trends have steadily improved. We're also seeing early signs of frequency recovery in our former SweetPath Plus cohort as a result of our personalized CRM offers. While we recognize that broadening benefits across a larger base of customers has brought some near-term headwind, we're confident this trade-off will deliver positive results starting in the fourth quarter. In the last 100 days, we made two significant hires to our executive team. On September 2nd, we will welcome Zipporah Allen as our new Chief Commercial Officer. Zipporah brings deep experience in brand building and customer engagement, having led Digital at Taco Bell and Marketing at Strava. She will play a critical role in sharpening our brand positioning and menu, driving demand, and strengthening the overall guest experience. In May, Jason Cochran joined us as Chief Operating Officer, and his positive impact is being felt all across the organization. As Jason has spent time in the field, he's been inspired by the strength of our team and the culture we've built. At the same time, he sees clear opportunities to raise the bar. The fundamentals, like sourcing, cooking, and throughput are there, but they're not always delivered with the consistency our guests expect or deserve. Today, about one-third of our restaurants are consistently operating at or above standard, while the remaining two-thirds represent a meaningful opportunity for improvement. Jason's assessment is grounded in a set of six operational metrics related to P&L, people, customer health, and throughput that allow us to objectively measure restaurant performance and identify where support and focus are most needed. He has launched Project One Best Way, a system-wide effort to elevate operational excellence by implementing clear operating standards, performance-based leadership, accountability, and measured execution. Project One Best Way isn't about reinventing our operations. It's about applying the standard of excellence with operational process, building on what's already working and ensuring every restaurant delivers to our highest standard. We expect to see substantial improvement over the coming quarters. Customer satisfaction has improved, especially around accuracy, food quality, and portioning, thanks to focused actions we've taken to drive consistency and reinforce value. This momentum reflects the resilience and determination of our teams to deliver the best guest experience, along with the clarity, urgency, and operational discipline Jason has brought to the organization. His leadership is already making an impact, and we're confident in his ability to drive lasting change across the fleet. We remain highly encouraged by the financial and operational performance of the Infinite Kitchen, which continues to outpace comparable restaurants in both age and volume. These units are delivering significant labor savings driven by greater efficiency, throughput capacity, and consistent execution. Our current cohort is also seeing elevated native digital sales, reflecting the model's ability to deliver fast, high-quality food at scale. While this quarter doesn't reflect the standard we set for ourselves, we're energized by the early traction we're seeing, from the return of our summer seasonals to the momentum and loyalty. At Sweetgreen, everything starts with a guest. We're relentlessly focused on delivering the superior experience through every touchpoint, with a focus on reinvesting efficiencies from G&A and other areas to make investments in protein portions, delivering value through loyalty, and investing in our team to create faster, more hospitable experiences. This will create a flywheel of increased traffic and frequency as we continue to delight and deliver increased value to our guests. Thank you for believing in Sweetgreen.

Thank you, Jonathan. Good afternoon, everyone. Total revenue for the quarter was $185.6 million, up from $184.6 million in the second quarter of 2024. Same-store sales for the quarter declined .6% compared to the prior year period. This reflects a .5% benefit from menu price increases and a negative .1% impact from traffic and max. Our average unit volume in the second quarter was $2.8 million. We opened nine restaurants, four of which were Infinite Kitchens, ending the second quarter with 260 restaurants. Notably, Forest Hills and Queens, New York opened as one of the strongest in the company history. Our 2024 class of new restaurants continues to track towards a Tier 2 metrics in year delivering a second quarter margin well above the fleet average. Notably, 40% of this class is located in legacy markets and 60% in new markets. This reaffirms our confidence in the effectiveness of our real estate strategy and the significant long-term growth opportunity that lies ahead. We are taking important steps to sharpen our portfolio in New York City. In July, we closed two restaurants, Leeker and Astor Place. These were older, smaller footprint locations and we strategically redirected volume to three newer, larger restaurants nearby. In just a few weeks, those receiving locations have seen same store sales increase by 15 to 20% an early sign that we've successfully recapturing demand. While we've done relatively little to our footprint in New York City since the pandemic, we're now actively reinvesting in the market. This summer, we opened Forest Hills, Park Slope, and 23rd and Park with the lower east side expected this fall. We're also relocating Union Square, which opened in 2015, and Nomad, our first New York City location, which opened in 2013. We are relocating them to improved locations and both will contain infinite kitchens. As leases mature on a small number of older locations, we see opportunities to consolidate volume into newer units, particularly in established urban markets where the footprint no longer aligns with our strategy. We expect this disciplined approach will strengthen AUVs, same store sales, and margins as we scale towards 1,000 domestic locations. For 2025, we anticipate opening at least 40 new restaurants and plan to enter four new markets, Arkansas, Sacramento, Phoenix, and Cincinnati. We continue to expect at least 20 new restaurants will have the infinite kitchen, with an additional two relocations that will be upgraded with the infinite kitchen. This year's pipeline also includes two new sweet lane locations, one classic and our first with an infinite kitchen. Restaurant level profit margin for the quarter was .9% compared to .5% a year ago, primarily driven by sales deleverage and some tariff impact. Restaurant level profit for the second quarter was 35.1 million, down 15% year over year. For a reconciliation of restaurant level profit and restaurant level margin through comparable gap figures, please refer to the earnings release. Food, beverage, and packaging cost for .7% of revenue for the quarter, roughly 70 basis points above the prior year period, primarily driven by a 40 basis point increase due to tariffs and duties on packaging. This is a level we expect to persist in the near term. Labor-related expenses were .5% of revenue for the second quarter. A 60 basis point increase year over year. This year over year increase is attributable to deleverage from the change in sales volume and wage rate increases. Offsetting these pressures is improvements in our labor optimization. Occupancy and related expenses were .9% of revenue, 80 basis points higher than the prior year period. Operating support center costs in the second quarter decreased versus the prior year period on a dollar basis. As a percent of revenue, year over year operating support center costs for the second quarter decreased to .1% from 15.2%. In the third quarter we restructured parts of our team and eliminated 10% of open and existing roles. Net loss for the quarter was 23.2 million as compared to a loss of 14.5 million in the prior year period. The increase in net loss is primarily due to a 6.4 million decrease in our restaurant level profit and a $5.3 million impairment charge due to the closure of two restaurants and three other restaurants that we will continue to operate. Adjusted EBITDA, which excludes stock-based compensation and certain other adjustments, was $6.4 million for the second quarter compared to 12.4 million in the prior year period. We ended the quarter with a cash balance of $168 million. Now turning to our fiscal year 2025 outlook. For the fiscal year 2025, we are anticipating the following. At least 40 new restaurant openings, revenue ranging from $700 million to $715 million, negative same-store sales of 6% to 4%, restaurant-level margin of approximately 17.5%, and adjusted EBITDA between 10 and 15 million. On the development front, half of the 2025 pipeline is opening in the fourth quarter. We do not anticipate any price increases for the rest of the year. Q2 is a challenging quarter shaped by a combination of internal and external headwinds. Several pressures converged at once, but the actions we've taken are already beginning to show positive results. We brought back fan favorite seasonals and chef collaborations, introduced more moderate price points to strengthen value perception, made strategic adjustments to our New York City footprint, and we are making improvements in our operations. On the loyalty front, we're seeing steady weekly improvement in guest frequency since the April relaunch, an encouraging sign. While we're not yet where we want to be, we're confident that these actions positions weakening to emerge stronger, more focused, and better aligned with what our guests and investors expect from us. And now I'll turn the call back to the operator to start Q&A.