CAVA Group Q2 Earnings Beat Estimates on Traffic and Unit Growth

CAVA Unit Growth Expands Restaurant Sales

The CAVA unit’s revenues increased 31.3% year over year to $365.43 million in the fiscal second quarter. The increase primarily reflected contributions from 94 net new CAVA restaurant openings during or subsequent to the second quarter of fiscal 2025, along with higher sales at restaurants in the comparable base.

Menu price and product mix contributed 3.7 percentage points to same restaurant sales. Average unit volume rose to $3.09 million from $2.94 million a year earlier. The company ended the quarter with 476 CAVA restaurants, up 19.6% year over year, while new restaurant productivity remained above 100%.

CAVA Group Sees Margin Pressure From Costs

CAVA’s restaurant-level profit increased 28.1% year over year to $93.81 million. However, restaurant-level profit margin contracted 60 basis points to 25.7%, reflecting a less favorable cost mix despite strong restaurant sales.

Food, beverage and packaging costs rose 50 basis points to 30.0% of revenues, largely because of input costs tied to the Pomegranate Glazed Salmon launch. Labor and related costs increased 30 basis points to 25.3%, reflecting an incremental 3% wage investment. Occupancy improved 50 basis points to 6.3%, while other operating expenses increased 40 basis points to 12.8% on a higher mix of third-party delivery.

CAVA Generates Strong Cash Flow Through Q2

CAVA paired growth with stronger cash generation through the second quarter of fiscal 2026. Net cash provided by operating activities increased 36.0% year over year to $134.5 million from $98.9 million, primarily reflecting improved operating performance and favorable working capital changes. Purchases of property and equipment totaled $89.7 million, resulting in year-to-date free cash flow of $44.8 million, up from $21.9 million a year ago.

Liquidity remained solid at the end of the fiscal second quarter. CAVA held $322.8 million in cash and cash equivalents and $112.8 million in fixed-income investments, representing approximately $435.6 million of combined cash and investments. The company had no borrowings under its $150 million revolving credit facility and had $149.1 million of available borrowing capacity, net of $0.9 million in outstanding letters of credit.

CAVA Maintains FY26 Outlook Amid Sales Rebound

CAVA reiterated its fiscal 2026 outlook for 75-77 net new restaurant openings and same restaurant sales growth of 4.5%-6.5%. The company continues to expect a restaurant-level profit margin of 23.7%-24.3%, pre-opening costs of $22.0-$22.5 million and adjusted EBITDA of $181-$191 million.

Management said industry concerns around the Cyclospora outbreak pressured same restaurant sales around quarter-end, but trends improved sequentially and most recently recovered to the mid-single digits. The outlook also incorporates expected fuel surcharges, the partial rollout of pre-marinated chicken and continued wage investments, while management indicated fiscal fourth-quarter restaurant-level margins historically decline by close to 300 basis points from the fiscal third quarter because of seasonality.

CAVA’s Zacks Rank & Key Picks

CAVA currently has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Zacks Retail-Wholesale sector have been discussed below.

BJ's Restaurants, Inc. BJRI currently sports a Zacks Rank #1 (Strong Buy). The company delivered a trailing four-quarter earnings surprise of 127.9%, on average. BJRI stock has surged 72.2% year to date. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for BJ's Restaurants’ 2026 sales and EPS indicates year-over-year growth of 4% each.

Five Below, Inc. FIVE presently carries a Zacks Rank #2 (Buy). The company delivered a trailing four-quarter earnings surprise of 70.1%, on average. FIVE stock has gained 24.3% year to date.

The Zacks Consensus Estimate for Five Below’s 2027 sales and EPS indicates growth of 15.1% and 36.1%, respectively, from the year-ago period’s levels.

FIGS, Inc. FIGS has a Zacks Rank #2 at present. The company delivered a trailing four-quarter earnings surprise of 201.8%, on average. FIGS stock has risen 24.8% year to date.

The Zacks Consensus Estimate for FIGS’ 2026 sales and EPS indicates growth of 18.2% and 57.9%, respectively, from the prior-year levels.

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