The restaurant sector took a bit of a hit this week with shares of Sweetgreen (NYSE: SG) taking the brunt of the move on news that consumers are cutting back in a lot of areas. Cava Group, another high-growth chain, also fell this week but Sweetgreen's move hit double digits.
According to data provided by S&P Global Market Intelligence, shares of Sweetgreen had dropped 17.4% this week as of 1 p.m. ET on Friday and there may not be a recovery around the corner.
Questions about the consumer
There wasn't any big news about Sweetgreen specifically, but this is a highly valued company that's still losing money, so if the macro environment is getting weaker that could impact how investors view the stock long-term. And this week wasn't good for that macro view.
Dollar General, Lululemon Athletica, and Ulta Beauty all reported relatively weak earnings and the theme from these reports was a struggling consumer. Spending isn't stopping entirely, but consumers, particularly on the low end, are trading down and even giving up some purchases as inflation and the lack of higher earnings have hampered spending.
Sweetgreen's financials
One of the easiest things to give up if you're cutting back is dinner at a restaurant and that's what investors are worried about. Sweetgreen still has a whopping $3.6 billion market cap, but just $649 million in revenue over the past year and it's losing money.
SG Revenue (TTM) data by YCharts
That's the financials of a company to take a risk on in the current economy and investors reacted accordingly. I am certainly not a buyer of this pullback and think there's a lot for Sweetgreen to prove to win back investor confidence.
Should you invest $1,000 in Sweetgreen right now?
Before you buy stock in Sweetgreen, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Sweetgreen wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $720,542!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of August 26, 2024
Travis Hoium has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Lululemon Athletica and Ulta Beauty. The Motley Fool recommends Cava Group and Sweetgreen. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
