Shares of fast-casual healthy dining chain Sweetgreen (SG) closed at $6.17 on Monday, down approximately 86% from their peak in late 2024, leaving the company with a market capitalization of just $733 million. Yet just as investors appeared ready to give up hope, third-party foot traffic data is beginning to hint at a subtle recovery — whether the company can deliver positive same-store sales growth in its second-quarter earnings report due August 6 will be the key to determining the stock’s near-term trajectory.
Multiple Headwinds Piled Up, Sending Shares to Rock Bottom
Over the past year, Sweetgreen has encountered nearly every challenge imaginable. Soaring food prices, customer backlash from changes to its loyalty program, and persistent inflationary pressures have collectively weighed down the company’s same-store sales performance. In the first quarter, same-store sales plummeted 12.8%, while revenue fell 2.9% to $161.5 million — even as the company continued to open new locations.
Adding to investor disappointment, the company unexpectedly sold Spyce, the business that housed its Infinite Kitchen automated food-prep technology, though it retained the rights to use that technology. The move was interpreted by the market as a retreat from its automation strategy, further eroding investor confidence.
Glimmers of a Turnaround: New Wraps and Improving Traffic
Early this year, Sweetgreen introduced lower-priced wraps as a response to customer complaints that its menu had become too expensive, while also offering consumers a convenient handheld option. The move rounded out its product lineup, putting it in direct competition with Chipotle and Cava — two leading fast-casual chains — across both bowls and wraps.
Foot traffic data from location intelligence platform Placer.ai suggests the new wraps are gaining traction. After experiencing monthly traffic declines since at least last July, second-quarter same-store traffic finally turned positive: March saw an 8.4% decline, April narrowed to a 2.9% drop, May flipped to a 1% increase, and June accelerated to a 3.9% gain. While Placer’s data underestimated the actual traffic decline in the first quarter (official figure was 11.2% versus Placer’s 8.4%), the month-over-month improvement trend is unmistakable and bodes well for the business.
Overhanging Concern: Food Safety Scare Rattles the Market
Just as signs of a recovery began to emerge, food safety concerns have once again spooked the market. The U.S. Centers for Disease Control and Prevention (CDC) issued a Health Alert Network advisory last week regarding a rapidly spreading cyclospora parasite outbreak linked to lettuce. According to the latest FDA data as of July 24, the outbreak has affected nine states, with 1,947 confirmed infections and 98 hospitalizations — though no fatalities have been reported.
Although no cases have been reported at any Sweetgreen location, investors were spooked nonetheless, given the chain’s salad-centric menu. The stock plunged nearly 15% last week amid the panic.
Outlook: August Earnings Could Serve as a Near-Term Catalyst
From a valuation perspective, Sweetgreen currently trades at a price-to-sales ratio of just about 1x, near historical lows. If same-store sales can return to steady growth, profitability is not out of reach. Management guidance already anticipates a gradual improvement in same-store sales, and Placer.ai data suggests the company may be performing better than expected.
Taken together, while the food safety issue has weighed on the stock in the short term, it has not undermined the company’s long-term growth thesis. If the traffic recovery driven by the new wraps continues, the same-store sales figures in the August 6 earnings report could serve as a catalyst to break the pessimistic consensus. For investors with a higher risk tolerance, the current price level warrants close attention.
