Sweetgreen announced a reduction to its full-year financial guidance on Thursday, citing diminished consumer demand for fresh prepared foods following a multistate cyclospora outbreak that began in mid-July. The salad chain projected same-store sales declines of 7% to 8% for the year, a significant downward revision from its prior forecast of 2% to 4% declines. The company also adjusted its profitability expectations downward, now anticipating an adjusted loss before interest, taxes, depreciation and amortization between $23 million and $27 million, compared with a prior forecast of earnings between $1 million and $6 million.
The Centers for Disease Control and Prevention reported that the cyclospora outbreak has sickened at least 10,000 people and resulted in two deaths. The Food and Drug Administration identified iceberg lettuce from a Taylor Farms facility in central Mexico as the likely source of contamination, leading to product recalls. Notably, Sweetgreen has not been implicated in the outbreak, nor has the broader salad industry been directly linked to contaminated supplies.
The outbreak has nonetheless created widespread consumer hesitation regarding fresh produce consumption. Taco Bell, operated by Yum Brands, represented the only major national restaurant chain directly connected to the outbreak, though sales at that chain have already begun recovering. Other establishments without direct links to contaminated products have also experienced sales pressure, with Chipotle Mexican Grill reporting approximately 2 percentage points of negative sales impact during the latter half of July. Salad and Go, an already struggling chain operator, filed for bankruptcy protection earlier in the week, citing consumer mistrust stemming from the outbreak as an exacerbating factor in its financial difficulties.
Sweetgreen additionally reported second-quarter results following market close Thursday. The company’s quarterly loss exceeded analyst expectations, and revenue fell short of Wall Street projections. Management indicated that the pace and timing of consumer demand recovery remained uncertain.
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