SG earnings call transcript, November 5, 2026

And hello, everyone. I want to start with gratitude for our teams. Doing so is core to our sweet green way, but it's also particularly important today. We're about to discuss a quarter in which we navigated an extremely tough environment, and our teams kept their attention where it mattered most, taking care of our customers and running great restaurants. We believe we have moved past the sales impact of the Cyclospora headlines. and sales momentum continues to build. Our performance improved through September, and October comparable sales were about 5%, with 4% transaction growth. There's a lot more to do, but this quarter offers meaningful encouragement that our strategic priorities are starting to translate into better performance. As we move into the next phase of our transformation, we are continuing to sharpen our focus on the things that will make the biggest difference for our customers, our teams, and our business. First, double down on our people and culture to deliver operational excellence. Second, strengthen our core and drive new occasions through craveable, farm-sourced, chef-made food. Third, lead in digital innovation to enable a seamless, personalized experience. Fourth, build brand relevance, growing distinction, and creating culture. And fifth, invest with discipline to deliver profitable growth. Starting with people and culture, we believe operational excellence is both an art and a science. For years, we have invested in the science of running great restaurants, better technology, systems, and tools that help our teams operate more consistently.

and efficiently. Project One Best Way has been an important part of that work, creating more consistent processes around food preparation, staffing, and peak readiness. We are seeing that show up in stronger culinary execution, better deployment, and faster throughput. We are not yet where we want to be across the fleet, but we have laid the foundation of repeatable, scalable processes. And that's where the art comes in. I recently visited Dee, our head coach at Wynwood in Miami. Our approach is simple. Take care of the team. So they take care of our customers. You see it in the little things. The team knows regulars by name, new customers feel welcome, and there is real pride in the food and the restaurant. The leadership shows up in the results with Wynwood outperforming its region across comparable sales. and restaurant level margin. It is a clear reminder that two restaurants can have the same menu equipment and systems and still deliver very different experiences. The difference is the head coach. Our job is to give them. The training tools, support, incentives and empowerment to build strong teams, run great restaurants and deliver an exceptional customer experience. Last week, we took a major step in that investment with a new compensation program that transforms the earning. The potential of our head coaches. Those with three or more years at Sweetgreen who lead our highest volume restaurants can earn over $200,000 a year in total compensation, including equity and a new revenue share bonus based on sales upside. We believe this is among.

The top tier earning opportunities in the industry for restaurant leaders. We want our head coaches to think and act like owners, build strong teams, earn customer loyalty and grow a profitable business by tying their compensation more directly to performance. We give them a clear. stake in the results they drive. We believe this creates a compelling reason for great leaders to join Sweetgreen. Stay with us and drive performance. It also gives every team member a meaningful growth trajectory. Compensation. is one part of that commitment. We are also strengthening training and development at every level. That starts on day one, building the right habits with every new hire. For kitchen leaders, we are strengthening training across prep, cooking, and pacing. For head coaches, we are investing more in coaching, business acumen, and leadership development. We also launched a restaurant tour program over the past year for our strongest head coaches, with tailored development, senior leader mentorship, and an uncapped $10,000 bonus for every team member that develop into a head coach. We are encouraged by the early progress and plan to expand it to more of our best head coaches in 2027. To take this work to the next level, we recently welcomed Lauren Crowley as our new chief people officer. She brings deep experience from Starbucks and Expedia, building strong leaders and high performing teams, and will be an important

partner as we strengthen our leadership pipeline and raise execution across our restaurants. All of these investments are focused on one thing, delivering a consistently excellent customer experience. Throughput is one of our clearest measures of restaurant health because it's shows whether a team is prepared, staffed, and deployed to win the peak. We are seeing progress. Despite seasonally lower volumes in September and October, our highest volume restaurants were serving more customers at peak than they were in May and June, and 40 restaurants set. New peak hour records over the last two months. The gap between our best and median restaurants remains significant, and that is why we believe improved throughput can drive hundreds of basis points of comparable sales growth over time. Turning to menu innovation, we have spent nearly 20 years building a leading position in the salad category and earning our customers.

At the same time, we have an opportunity to expand into more occasions, flavors, and categories and to do it in the sweet green way with farm source ingredients and chef design meals our customers love. We estimate the addressable category across bowls, plates, sides. beverages, and desserts is approximately seven times the size of the salad category. Innovation in these areas gives us a clear path to capture a larger share of that market, attract new customers, and make sweet green a go-to choice across more occasions. RAPs are a great example of how new formats can broaden our reach. They create a strong entry price point and another way for customers to experience sweet green. Since launch, we have seen a meaningful acceleration among Gen Z customers, which is now one of our strongest growing cohorts. That gives us confidence in the opportunity and we will continue to innovate around wraps to attract new customers and give existing customers more reasons to return. Since launching wraps, incidents has remained in the high teens with the recent step up following our fleet wide collaboration with Molly Bass. Molly. She joined us as our first chef in residence and the strength of that launch gives us confidence in the opportunity to build this into a repeatable platform for menu innovation with talented chefs. The lunch means business campaign with Molly brought together craveable food, distinctive, creative and strong restaurant.

It was one of our most successful brand moments in recent years and a clear example of what we can achieve when culinary marketing and operations are aligned from the start. We are building on that momentum with the addition of John Karangas as our executive chef. John brings deep experience from Shake Shack and Union Square Hospitality Group and understands how to create delicious food that can be executed at scale. He will help us raise the bar on flavor across our menu while staying true to the high quality ingredients our customers deserve. Our next major focus is making sweet green a stronger choice for dinner. Today, sales after 5 p.m. represent only about one third of our business and we see significant room to grow with plates leading the way the original. Plates launch in 2023 demonstrated the category's potential. Next week, we're putting plates back in the spotlight and giving customers a compelling reason to choose sweet green for dinner. These warm, filling, hearty offerings are ideal for nights when guests want a satisfying meal. Without cooking at home. Paired with what we believe is some of our strongest marketing yet, they can help keep sweet green top of mind as the weather turns colder and dining preferences shift. We are thrilled to expand this experience with a new sourdough chocolate chip cookie made with coconut product. sugar, no seed oils, and freshly baked in our restaurants. It is simple, delicious, and another way to broaden the occasions when customers choose sweet green. Our work goes well beyond the kitchen. Better food gives us a stronger brand story to tell. We are putting taste, craveability.

and the range of our menu at the center of our messaging while continuing to reinforce the ingredient standards that set us apart. The goal is simple. Bring more customers into sweet green and give them more reasons to come back. Menu innovation and a stronger marketing ecosystem are driving higher frequency and bringing back more. collapse customers while greater discipline and how we invest is improving our return on ad spend. We're also increasing our investment in brand awareness where we see a significant opportunity to reach new customers and drive trial. We are telling a broader story about what sweet green can do for our customers. Food that tape. It's great, makes you feel good, and fuels your day. And our customers often tell that story best. This quarter, a customer named Tim Donahue ate sweet green twice a day for almost a month and shared the experience. That inspired our 30 days of sweet green challenge, which brought together customers ranging from Olympians to working mothers and creatives, each showing how sweet green fits into their daily lives. What stood out most was the connection and created participants. Share their experiences, encourage one another and brought our mission to life, building healthier communities by connecting people to real food. We're also making progress on our value proposition. Over the past year, we have improved protein portions. We have introduced stronger entry price points across salads and wraps, and our customers are noticing. In our brand health surveys, complaints around both portion size and pricing are now at their lowest level in three years. The next opportunity is to make that value even easier to understand.

We see room to further simplify our menu and pricing architecture, and our create your own pricing test remains in market as part of that work. We will continue to evaluate customer response before making any broader rollout decision. At the same time, we are building a stronger calendar of reasons to visit. We are finalizing our 2027 marketing calendar, and we believe it is our strongest lineup yet, with major culinary launches, partnerships, and brand moments throughout the year, supported by a more consistent, always on. approach that keeps Sweetgreen top of mind and gives our customers more reasons to visit. Just as important, we need to make it easier for customers to act on that interest. The way people discover and order food is changing quickly, and we are focused on digital innovation that makes Sweetgreen easy to find and easy to order, wherever that journey begins. We have been thoughtful about the data and infrastructure behind our digital business. As customers begin using AI tools and agents to decide what to eat, we are working to ensure our menu, restaurant and nutrition information is accurate and accessible. We are also testing new ordering experiences and will keep doing the work to make it easier for customers to choose Sweetgreen, even as habits evolve. Meanwhile, loyalty is becoming a powerful growth engine for us. We made our rewards more accessible earlier this year, and since then we have sustained higher member engagement and a 50% increase in monthly redemptions. In September, we relaunched our app with a read.

We're designed, easier to navigate experience that puts our newest menu items and personalization front and center. And we're just getting started. Next year, we plan to evolve SG rewards beyond an earn and burn program into a branded platform built on experiences. Our final transformation pillar is investing with discipline. To deliver profitable growth. Our restaurants need to be more consistent and accountable for their operations, particularly in managing food and labor costs. We began to see real progress in September, but continue to have a big opportunity in both the flow of food and restaurants and better labor execution. Jamie will elaborate more in a few minutes. We remain confident in the opportunity ahead. We know what our best restaurants can deliver, and we are putting the leadership, training, and support in place to make that performance more consistent. In 2027, our development strategy will be more disciplined and focused on the highest return opportunities. We are sharpening our approach to market selection, restaurant design, and construction costs to improve returns on invested capital and build a stronger foundation for profitable growth. As we execute against these priorities, we believe we can sustain sales growth, rebuild average unit volumes, and expand restaurant level margins over time. To close, the restaurant industry has always been one of this country's great engines of opportunity. At Sweetgreen, we are building on that promise. Someone can join us as a team member and grow into a head coach leading a multimillion dollar business. And now our highest performing tenured head coaches at our highest volume

restaurants can earn over $200,000 in total compensation, including equity. From an hourly role to leading a restaurant earning over $200,000 and sharing in the company's success. That is the American dream. We want Sweetgreen to be a place. where more people can achieve it. To every team member, thank you for the hustle, the pride, and the care you bring to Sweetgreen every day. You make this opportunity possible, and as we build this business, we want you to share in its success. With that, I'll turn it over to Jamie. Thank you, Jonathan. Turning to our third quarter results. Revenue was $176 million compared to $172.4 million in the prior year, an increase of approximately

restaurants from ordering inventory to preparation and serving. That means accurate inventory counts, better visibility into ingredient usage and clear accountability. While results have been slower to materialize. We are doing important foundational work that we believe will translate into more meaningful savings over the next year. We believe these initiatives can improve restaurant level margins by approximately 150 basis points in 2027. And for the fourth quarter, we expect food. Beverage and packaging costs to step down to the low 28% range. Labor and related expenses were 30.5% of revenue compared to 29.1% last year, an increase of approximately 140 basis points. The increase was primarily driven by sales deleverage late. labor inefficiencies and wage inflation. Our best restaurants demonstrate what is possible when we have the right staffing, deployment, and leadership in place. To help bring more of the fleet to that level, we recently completed a comprehensive labor study focused on aligning staffing more close specifically with customer demand throughout the day. That work is already informing how we schedule and deploy our teams. We are giving operators better visibility into peak hour coverage and throughput performance while sharing best practices from our highest performing restaurant. across the system. Based on what we learned from the study and what our best restaurants are already achieving today, we believe there's around a couple hundred basis points of labor efficiency opportunity over time. Importantly, this is about running our restaurants better.

Not compromising the customer experience. Better deployment should allow us to serve customers more effectively while supporting stronger restaurant level margins. Beyond the tools and processes, we believe the greatest opportunity to drive consistent restaurant performance starts with our restaurant leaders. As Jonathan discussed, we are making an investment in our restaurant leaders through our new head coach incentive program and annual salary increases for team members. We expect this investment to impact restaurant level margin by approximately 25 basis points in 2027. By aligning compensation with restaurant performance, we believe the program can deliver meaningful returns through stronger retention, better execution, and improved restaurant profitability over time. And for the fourth quarter, we anticipate labor costs to be about 31 percent. Other operating expenses were 19.9 percent of revenue, compared to approximately 17.6 percent last year. The increase was primarily driven by sales deleverage and higher repair and maintenance costs and delivery fees. For the fourth quarter, we anticipate other operating costs to be about 19 percent. Taken together, we expect fourth quarter restaurant level margin of approximately 11 percent. This includes about 60 basis points of one-time costs related to a special bonus incentive for our head coaches. And an inventory adjustment. The fourth quarter is seasonally one of our lowest margin periods. Based on historical patterns, restaurant level margins are typically 250 to 300 basis points below the full year average. Adjusting for typical season

mortality and excluding one time costs, we estimate our underlying annualized restaurant level profit margin at approximately 14%. This is our current estimated profitability baseline before any additional efficiencies and labor and cost of sales. General and administrative expenses were $27.6 million, compared to $30.9 million in the prior year, a decrease of approximately $3.3 million, primarily driven by lower stock-based compensation. Underlying support center costs, excluding stock-based compensation and certain one-time expenses, were approximately $24 million, roughly flat compared to $24.1 million. Lower salaries and benefits were largely offset by higher marketing spend. Our focus is on growing with a disciplined cost structure. That means carefully managing the cost and pace of new restaurants. Openings taking a rigorous look at our underlying gna and ensuring every dollar we invest strengthens our economic model. We have an opportunity to support a larger business with our existing infrastructure and that discipline. will be critical to delivering profitable long-term growth. Adjusted EBITDA was a loss of 6.8 million dollars compared to a loss of 4.4 million dollars in the prior year. We ended the quarter with 119.8 million dollars in cash and cash equivalents. During the quarter, we opened three net new restaurants and ended the quarter with 290 restaurants, including 36 infinite kitchen locations. Now turning to our updated full year fiscal 2026 outlook.

We now expect comparable sales to be down about 5.5%. We expect restaurant level margin to be between 11% and 11.5%. We expect adjusted EBITDA to be between negative $23 million and negative $20 million. And we expect approximately 10 net new restaurant openings. Looking ahead to 2027, we expect net new restaurant openings to be about half of the 2026 level as we prioritize strengthening the economics of our existing restaurant base. We are also taking a more disciplined approach to future development with great greater focus on site selection, restaurant design, construction costs, and returns on invested capital. To close, while there's more work ahead, we have greater visibility into the opportunities within our control and our focus on executing against them. We know what our best restaurants can deliver. The work now is to make that performance consistent across the fleet and translate it into profitable growth and attractive returns for shareholders. With that, we can open it up for questions.

Your first question.

is from the line of Dennis Geiger with UBS. Your line is now open. Please go ahead.

Joel Crow with J.P. Morgan. Your line is now open. Please go ahead.

And our brand, our food, our mission and the growth ahead of us. So thank you all for the questions and I look forward to seeing you all next quarter to share more progress.