Thank you for standing by. My name is Tina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Sweetgreen Incorporated First Quarter 2025 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. We respectfully ask that you keep your questions to one. [Operator Instructions] Thank you. I would now like to turn the call over to Rebecca Nounou. Please go ahead.

Thank you, and good afternoon, everyone. Speaking on today’s call will be Jonathan Neman, Co-Founder and Chief Executive Officer; and Mitch Reback, Chief Financial Officer. Both will be available for questions during the Q&A session following the prepared remarks. Today’s call is being webcasted live and recorded for replay. The earnings release is available on the Investor Relations section of Sweetgreen’s website at investor.sweetgreen.com. 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-GAAP financial measures, including reconciliations of non-GAAP financial measures mentioned on the call with the corresponding GAAP 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 everyone. Sweetgreen is redefining fast food, proving possible to operate with financial discipline without compromising on the quality of our menu or the seamless experience that defines our brand. As we scale, we’re building a more resilient business and leaning into what’s working. Our real estate playbook reflected by the strength of new markets and recent restaurant openings, our Infinite Kitchens and sweetlane formats are unlocking operational efficiencies while enhancing the guest experience. We’re also advancing menu innovation while refining our core ensuring every ingredient is prepared, sauced and seasoned to create meals that keep guests returning again and again. Our first quarter results reflect the progress we’ve made despite the quarter being significantly impacted by several external headwinds. These include the holiday timing shift, the LA wildfires and their lingering impacts, as well as adverse weather impacts across several regions. For the first quarter, we reported sales of $166.3 million and a same store sales decline of 3.1%. These results are toward the higher end of our guidance range. By staying focused on what we can control, we delivered a restaurant level profit margin of 17.9% and achieved slight adjusted EBITDA profitability, both above our provided outlook. Looking ahead, the macro environment remains uncertain and volatile. April sales trends were soft, which we believe is reflective of a broader consumer slowdown. This has been particularly true in our largest markets such as New York, Boston and Los Angeles. However, we’re confident in our ability to deliver long-term value for our guests, our team members and our shareholders. I’m proud of the strides we’ve made, but no true operational excellence requires relentless attention to detail, especially now. That’s why our team is committed to optimizing every process, no matter how small, to drive continuous…

Thank you, Jonathan. And good afternoon everyone. Total revenue for the quarter was $166.3 million, up from $157.9 million in the first quarter of 2024. Same-store sales for the first quarter declined 3.1% compared to the prior year period. This reflects a 3.4% benefit from menu price increases and a negative 6.5% from traffic and mix. Same-store sales grew in more than half of our markets, led by the Upper Midwest, Texas and Colorado, all of which comped double digits. Our average unit volume in the first quarter was 2.9 million. We opened five restaurants, ending the first quarter with 251 restaurants. Restaurant level profit margin for the quarter was 17.9% compared to 18.1% a year ago. Restaurant level profit for the first quarter was $29.7 million, up 4% year-over-year. For a reconciliation of restaurant level profit and restaurant level margin to comparable GAAP figures, please refer to the earnings release. Food, beverage and packaging costs were 26.5% of revenue for the quarter and more than 100 basis point improvement from the prior year period, primarily due to distribution savings from continued market densification and ingredient consolidation as well as favorable contract pricing on key ingredients. Labor and related expenses were 28.9% of revenue for the first quarter in line with the prior year period. Occupancy and related expenses were 9.4% of revenue, slightly higher than the prior year period. Operating support center costs in the first quarter increased slightly versus the prior year period on a dollar basis. As a percentage of revenue year-over-year operating support center costs for the first quarter decreased slightly to 16.7% from 17.1%. Net loss for the quarter was $25 million as compared to a loss of $26.1 million in the prior year period. The decrease in net loss is primarily due to a…

[Operator Instructions] Our first question comes from the line of Jon Tower with Citigroup. Please go ahead.

There we go. Thanks. I guess, maybe starting – I appreciate all the color you offered in tariffs and in terms of across the business in IK. And I think that’s certainly a point of a question that I’m getting a lot from investors. So I just want to clarify and make sure that I understand. It looks like all in based on the range for build out costs and including an Infinite Kitchen, it’ll be roughly 32% to 37% higher than what you guys had originally targeted for stores previously for build out costs with these tariffs in place. And that’s kind of the current situation that you know, for tariffs coming in from China. That’s not assuming any changes at the moment for what’s going to happen going forward.

Hi Jon, it’s Mitch. I think what I would say is the build out cost for an NRO with no tariffs is approximately $1.5 million. And as of now we see that tariff running about a 10% of that type of number. So call it $150,000 per unit. And on the Infinite Kitchen call an average cost of $500,000 per IK, the tariff is approximately $100,000. So you would see a total tariff impact of about 2.5 – $250,000 on a $2 million build out. So just a little bit over 10% and I should point out in this dynamic world that says of the tariffs as of last night.

Okay. And just – go ahead, sorry.

So Jon, just one thing to add. We mentioned on the call that we’ve pre-bought materials for the majority of our pipeline this year. So a lot of that impact including some Infinite Kitchens on hand. So that is not impacting the entire pipeline this year we really start to see the impact on the build out in Q4 and we do have a good number of IKs on hand and working to diversify the supply base there. The other thing I’d say is, over the years we’ve talked to you all about the work we’re doing to optimize the overall build out cost. So this is all on a kind of apples-to-apples basis. We’ve obviously been working really hard on new formats and just general cost optimization. So our hope is to mitigate as much of this as possible. But this is just kind of if we took the impact as a straight apples-to-apples.

Got it. And maybe just one follow-up, Jon, you mentioned in the prepared remarks the idea of perhaps adding more mid to lower priced items to the menu, either evergreen or LTO options for value. Like one, where are you in that process? And then two, how do you plan on communicating that to guests? You’re not necessarily a traditional marketer nor would I expect you to be out there blasting the airwaves with a value pitch per se. So is this something we should expect more through the rewards program or more through point of purchase? Like how do you plan on getting that message out to folks who might not be aware that now there is something that’s more approachable?

So I think what I’d start with is, if you look back over the past five years in the high inflationary environment, we’ve actually taken less price than most of the industry. What we have done is in an effort to broaden our TAM and broaden our consumer, we did introduce these hardier, warmer options, things like protein plates and steak. And the beautiful news about that is they really did work in unlocking a lot of those TAM markets. You can see that in the strength of those new markets and the comp in the emerging markets. But as we did that, some of the price value perception, if you look at our menu, you now have this higher category price things, great value for dinner. But we’ve noticed some price gaps on the menu kind of in the middle or lower tier. So we see a couple of ways that we can do that. One is through our seasonal menu. Our seasonal menu allows us to flex into different price points. We do see some opportunities to potentially introduce some things in the core. We would not present them as necessarily as a value menu to your point. It would just be kind of finding things, kind of anchoring more of the menu in the middle – mid to lower price tiers. And of course, loyalty becomes a really big lever for us to be more surgical and personalized around how we can create the right customer journeys, the right promo and the right next best action to drive the long-term value of our customers. So we have a lot of levers at hand. And I think given – we mentioned on the call is, given the way our menu is constructed, we have the ability to move pretty quickly in terms of coming up with new menu items and coming up with things that both the consumers love. We can execute seamlessly and can kind of meet our margin profile. So the world changed pretty quickly here in April. But have a lot of tools at our disposal.

Great. Thanks for taking the questions.

Our next question comes from the line of Sara Senatore with Bank of America. Please go ahead.

Thank you. Maybe actually, quick question about any differences you might be seeing in terms of geography. I’m just thinking about your exposure to D.C. because April has been quite mixed, I think, for different restaurants, and so trying to understand why some might be feeling the impact of lower consumer confidence while others are actually seeing acceleration. So I didn’t know if there was a maybe just your geographic exposure. And then I do have a quick follow-up.

Hi Sara, thanks for the question. Yes, I would point out two areas in our geography that are probably noteworthy. One that we mentioned on the last call, Los Angeles, which we said was about 15% of our volume, continues to be severely impacted in the aftermath of the LA fires. In our modeling, we see some lingering impacts of this continuing on for quite a while. And as you pointed out correctly, sometime around the beginning of April, we did see a change in our DC volume. The company began in Washington, D.C., it’s kind of one of the markets that we’re identified with. We have a number of stores there, but I should point out they’re generally older, smaller stores in the D.C. market. But there clearly was a change in the D.C. performance around the beginning of April.

Okay, thank you. Very helpful. And then the follow-up is about the breadth of your reach. I’m super excited about the collaboration, but that strikes me as a little bit of a New York institution. How do you think about that in terms of appealing? I think, as Jon mentioned, broadening TAM and kind of the things that you do from a culinary perspective. Thanks.

Yes. So we’re very excited about this collaboration. I think, it’s beyond just the collaboration. It’s really about the bold flavors that we’re bringing to market. We’re excited for everyone to taste it. It’s a totally different flavor profile. It really leans on both the sourcing and scratch cooking, but brings in this these Korean flavors and leverages our new steak offering with a twist. So in terms of the actual collaborator, what we – the reason we do this is it gives us a lot of culinary credibility and it actually the partnership with the chef helps us build truly delicious items. So it’s a part of our storytelling. There’s a lot – huge experiential element as part of it, and we know it’s a core part of how we built this brand and I think something that consumers expect. So what we’ve learned is it’s not just if you’ve heard of it, for us, it’s a huge way to drive discovery for these great chefs that you may or may not know. So very excited about bringing this new flavor and excited to share more with you on the next call.

Thank you. Our next question comes from the line of Sharon Zackfia with William Blair. Please go ahead. I’m sorry. Our next question comes to the line of Andrew Charles with TD Cowen. Please go ahead.

Thank you. This is Zach Ogden on for Andrew. Just given April’s mid-single-digit decline in same-store sales, could you just walk us through the cadence of sales you’d expect for the rest of 2025 to get the flat for the full year?

Thank you. What I would say about April, as other people have noticed, April has generally been a month when our business has accelerated. That’s probably been the pattern that’s been in the business since inception, as the weather warms up, our business picks up. This April that did not materialize. There’s actually a significant change in the history and in the historical patterns of the business, largely coincided with the tariff announcement and some of the external uncertainty. What we see is the second quarter being challenging, both from a comp perspective led by April, as well as the fact that the launch of our loyalty program as we’ve disclosed, will create some headwinds around our revenue number as we launch that program. During the back half of the year, particularly Q3 and Q4, we see business picking up for a number of reasons. One, we have slightly easier comps during that period. Two, the return of our summer seasonals and fall seasonals. These have been crowd favorites for a number of years that were not on the menu in 2024. And we think they’ll have a massive impact beginning around July 24. In addition to which, we have our loyalty program, which as I said will be a headwind in Q2 but becoming a pretty big tailwind as we go through Q3 in the back half of the year. I should point out, as was kind of alluded to at the beginning, there’s a degree of synergy between the launch of seasonals and loyalty program, where they can feed each other to help drive frequency and attract new customers. So we think we have a pretty solid lineup of activity actually starting next week with the CO2E collaboration, but really accelerating in July.

Got it. Thank you. And then just on the Infinite Kitchens, if the tariffs do persist, would that change your aptitude at all to retrofit stores, to IKs going forward?

No, it really would not at this point in time, change our deployment strategy around the Infinite Kitchen. When you do the math on the Infinite Kitchen and you take a kind of typical AUV store at $3 million and 8 points of saving, you get around $240,000 annually. If the cost moved up from 500,000 to 600,000, you find the return on capital remains wildly accretive, and that’s a current labor rates. When you look out over the next 10 years, we see labor continuing to increase and those returns increasing. So I would say the current tariff structure would not change the IK deployment strategy at all.

Great, thank you.

Our next question is from the line of Sharon Zackfia with William Blair. Please go ahead.

Hi, can you hear me?

Yes.

Okay, thanks. I don’t know what happened before. I guess, I wanted to ask about the markets that you called out, which were – you talked about LA, but you also mentioned New York and Boston. Is there anything in those markets where you think your perceived value has somehow kind of declined in the recent environment? Is there anything you could point out operationally that maybe is causing those markets to gap differently than some of the other markets that you’re operating in?

Thanks for the question, Sharon. So I think there’s a few things here. First, I’d say if you think about the Sweetgreen model over our history, the seasonal menu was a core part of the model. We would change our menu about five times a year. And it’s part of what drove the habituation, the frequency. It’s what would limit the fatigue and just keep you hooked season after season. With the removal of that, we’ve seen some weakness in the frequency of it, specifically in those core markets where those seasonals did especially well. So we’re encouraged by bringing them back in a really big way, and we think that will help us with the frequency challenges we have. The second is loyalty. We made a transition from our SweetPass plus loyalty program, which really had a pretty small member base to a much broader base loyalty program. And we’re acquiring about 20,000 new loyalty members a week. This is pretty much more than each week than the whole SweetPass plus membership base. So there’s a huge opportunity here to kind of lean into that to continue to drive frequency. And then the last thing I’d say is that there’s definitely some operational opportunities we have specifically in a lot of those core legacy markets, specifically in the urban environment on our off-premise channels. So really highly focused on getting portioning and accuracy and speed right on those digital make lines. As you know, digital is a huge, huge part of the business and we see an opportunity to really elevate the standards across those lines.

Okay, thank you.

Our next question comes from the line of Logan Reich with RBC Capital Markets. Please go ahead.

Hey guys, good evening. Thanks for taking my question. I wanted to ask about Fries and how the launch went relative to expectations and maybe anything you’re able to share on mix in terms of number of transactions or contribution to comp. Any color there would be much appreciated.

Sure. So very early but very encouraged by Fries. We’ve had great customer feedback, great social awareness, a lot of fantastic trial and it’s our – it’s by far our most attached side. So very encouraged continuing to work to perfect them and get the word out. But overall I think it’s something that we’re really proud of and customers love and should continue to help drive comp and ticket.

Our next question comes from the line of Brian Mullan with Piper Sandler. Please go ahead.

Thank you. I just want to ask about the marketplace sales channel. That’s been growing faster than the in store and the owned digital really for several quarters now. Can you just speak to what’s behind that particularly throughout last year and start this year? Just any color you could add would be great.

Yes. So we continue to see strength on marketplace. I think there’s a few things. One, I think our product travels well and people love the fact that it just works in an off-premise environment. Two, we continue to optimize our relationships with the marketplaces and how we market and how we’re presented on those marketplaces. And I think a lot of our consumers are there. Lastly, I think not having a loyalty program gave a lot less reason to transact natively and with the loyalty program that should help us there. But overall, good partners with them, happy to see continued growth, higher average checks, and we’ll continue to leverage them as a partner. Thank you.

Thank you.

Our next question comes from the line of Brian Bittner with Oppenheimer. Please go ahead.

Hey, thank you. Just with all this talk, a lot of focus here on April sales trends on this call, just another question there. You said down mid-singles and a change in how April has behaved historically. So I understand your caution, but is there any of this that is explained by your own toughening comparisons that happened into 2Q from 1Q? Is any of April just mathematically driven? Or are you seeing underlying weakness that’s making you more cautious on the near-term and on 2Q?

Yes. Brian. I think that the more challenging comp period for the business will come actually in the next week as we launch – a successful launch of steak gets lapped. So Coke [ph] will lap over the launch of steak a year ago. I think the April caution and, results and the caution on the second quarter largely come from what we saw in April where we had a period of limited menu and marketing activity, but that kind of lapped the same type of situation last April. It really reflects much more of an external environment and kind of our take on consumer sentiment.

Okay. And then just real quick on your guidance for the year for adjusted EBITDA now approximately $30 million. I’m just trying to bridge to that guidance in my own model when I use the midpoint of your revenue and your restaurant margin guidance. The bridge from there is about flat G&A year-over-year versus last year on an adjusted basis. Is that the right math there? Is that how you’re thinking about G&A as it relates to that $30 million of adjusted EBITDA?

Yes. I would point out and say that, really since the time we went public, the company continues to focus on gaining leverage in our G&A, and we continue to focus on that and accelerate that in this environment and to make changes where we can adjust the G&A down without impacting our strategies or our development. And we will continue to really relentlessly pursue that in this environment.

Okay. Thank you, Mitch.

Our next question comes from the line of Christine Cho with Goldman Sachs. Please go ahead.

Thank you for taking the question. So I was wondering if there were any updates to how you’re thinking about capital allocation and investment priorities in light of the tougher macro environment and other external factors. I think, Jon, you mentioned a 15% to 20%-unit growth. Is that still a good anchor for the next few years? And what are some of the factors and triggers that could potentially shift that trajectory? Thank you.

Hey, Christine. Thanks for the question. I think what we said is that we were going to anticipate having a 15% algorithm and accelerating it up to 20% over time. That is still the correct algorithm. And while you’re correct that the external environment right now is certainly more challenging and changed somewhat abruptly around the April. We continue to have very strong return on capital on our new stores and especially strong return on capitals with our Infinite Kitchen. As long as our return on capital remains at these levels, we don’t see any change in our development.

Thank you. Just one other question. Any metrics that you can share on kind of the launch of the SG rewards to date and how you plan to leverage the data you obtained from that program to inform kind of your meta innovation, marketing, and other parts of the business? Thank you.

Yes. Overall, very encouraged. Like I said, we’re requiring about 20,000 – 20,000 new digital customers on those SG rewards program per week. Much of that conversion is happening in store, so we’re now getting access to customer data at the – on our analog in store channel as well as our digital channels. And we’re starting to see some promising – I’d say some promising opportunities around the customer journeys and how we can drive the incremental visit. We have a very, very good team that’s able to segment customers and do all kinds of different challenges and promos and see what works and lean on those ones. And especially in this environment, I see a huge opportunity. It also gives us really rich data in terms of menu development, and we have a few exciting things planned on how we can leverage the digital environment to create more of a community, and we’ll be sharing more on that in future calls.

Thank you.

Our next question comes from the line of Brian Harbour with Morgan Stanley. Please go ahead.

Yes. Thanks. Good afternoon. I guess, you’re going through another COO transition here, right? Could you just comment on – if you think any of the priorities there will change or if it’s more of a continuation of what you’re doing? Is there anything that you thought was sort of behind timing or needs to be shifted? What will – what could evolve on sort of operations priorities?

Absolutely. So we’re really excited for Jason to join us, and he brings a wealth of experience specifically in restaurants. The focus areas for us really are in terms of tightening up our standards, to deliver consistently the quality food that customers expect. We also see a big opportunity I mentioned earlier on our digital make lines and making sure we’re delivering accurately and with the right portion size. We see a big opportunity there. And then the last thing I’ll say is with the growth plans we have ahead, we want to make sure our people flywheel is unlocked. Today, we’re seeing about 50% of head coaches being promoted internally. We would like to take that number up over time. We see our internal promotes being more successful. So the other thing is how we can build better leadership capability and have a pipeline of future leaders. So, you know, it’s operations. It’s really, it’s all the little details to deliver, whether it’s the right tools, the right systems, and most importantly the right culture and leadership in each and every store. And we’re very confident in the wealth of leadership and experience that Jason will bring as well as the rest of our ops leadership team to continue to deliver on the Sweetgreen promise.

Okay. Thanks guys.

And our final question comes from the line of Rahul Krotthapalli with JPMorgan. Please go ahead.

Hi, guys. Jonathan, a lot has been discussed in terms of how advertising costs could get very low on a per transaction basis. I think especially as agencies given to AI models and, like, large brands and the consumer and Internet industry are catching up on this. You have been leading the space in business transformation in multiple areas of your operations, whatnot. Curious how you think about this area, on advertising and marketing spend. This is going to be a big focus going forward for your sales and traffic driver?

Raul, thanks for the question. I do think it’s a huge opportunity. We’ve been leveraging AI across the business in a number of use cases, whether it be workforce management, talent selection, and customer service, et cetera. And I think there’s a lot of opportunities to leverage AI in terms of our – in terms of loyalty and customer acquisition as well. So we’re exploring and testing a bunch of things today. We’re hopeful that it can help us in terms of our cost per acquisition of customers and our retention, but I’d say it’s still early days. But a number of tests and pilots that the team is all over right now.

Thank you.

Ladies and gentlemen that concludes today’s call. You may now disconnect.