(Bloomberg) -- Cava Group Inc. raised its full-year outlook after posting second-quarter results that beat expectations, the latest indicator that diners see good value in fast-casual restaurants.
Sales at locations open for at least a year jumped 14.4%, exceeding the average estimate of analysts polled by Bloomberg. The company now expects sales by that metric to rise as much as 9.5% this year, up from the previous forecast of 6.5% at most.
“Cava continues to benefit from being in an almost singular category that is hard to replace at home,” Citigroup Inc. analyst Jon Tower wrote in a note to clients.
Fast-casual chains, which say they balance convenience with higher-quality meals, have broadly held up in recent quarters even as US diners cut back on restaurant spending. With price gaps between these chains and fast-food restaurants narrowing, many Americans are willing to spend a few more dollars to get a Cava bowl or a Sweetgreen Inc. salad.
Customers flocked to the Cava’s new grilled steak offering during the quarter, even though it costs more. They’re also adding side orders like pita chips and juice.
“We’re seeing trade up from quick-service chains,” Chief Executive Officer Brett Schulman said in an interview.
Schulman expects an increase in traffic to drive same-store sales growth in the second half of the year. The company raised prices by less than 3% in January and has no plans for another increase this year.
The shares rose as much as 10% in New York trading, the most in almost four months. Cava stock has surged nearly fivefold since the company went public in June last year. Its recent success has mirrored that of companies such as Sweetgreen and Chipotle Mexican Grill Inc., which use similar workflow to serve diners quickly.
(Updates share trading and adds analyst in third paragraph.)
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