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Healthier Margins

The economics of $15 salads are improving, but Sweetgreen is still in the red

Sweetgreen narrowed its losses, raised its guidance, and sold a lot of steak salads in Q2

8/9/24 5:15AM

Updated 8/23/24 7:10AM

Sweetgreen reported nearly $185 million in Q2 sales of salads like the “Chicken Pesto Parm”, the “Shroomami”, and the “Kale Caesar”. But, as in the previous quarter, despite selling salads for $15, $16, or even $18... Sweetgreen is still not profitable.

We’ve indexed Sweetgreen’s earnings to $15 — roughly the price of a typical salad at the chain (although there’s a strong argument that $16 or $17 might be more appropriate) — to understand the latest in salad economics.

When we did this exercise in Q1, Sweetgreen was losing $2.56 for every $15 of revenue. Now, it’s losing just $1.31 for every $15 of sales.

The economics of a $15 Sweetgreen salad — Sherwood News

The company’s core restaurant operations are, once again, nicely in the green with “restaurant-level” profit margins of some 22%, boosted in part by new menu items featuring lots of caramelized steak. But, once you account for all of the other overheads, the depreciation of its assets, some “pre-opening” and other costs (worth about 14 cents in our example), Sweetgreen is still in the red.

Romaine-ing calm

With a valuation of more than $3 billion, investors clearly expect the company to continue opening stores (it opened a net of 4 more in the latest quarter), growing sales, and expanding its margins. And a big part of the plan is automation, with robots able to dispense, mix, and serve salads at select locations — an innovation Sweetgreen calls the “Infinite Kitchen” (an unhelpful name because what exactly is “infinite” is unclear... the amount of salad, the amount of kitchen... or something else?).

On a call with analysts yesterday, Sweetgreen’s CEO said they expect that “more than 50% of new units would include Infinite Kitchen next year”. At Naperville, an Infinite Kitchen restaurant that just crossed its one-year anniversary, the restaurant level margin was more than 31%, considerably higher than the company’s average.

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Starbucks issues apology after viral “Bearista” cup meltdown

Holiday cheer turned into chaos this week for Starbucks after the coffee giant’s new “Bearista” holiday cup sent fans into a frenzy.

Dropped alongside its 2025 holiday menu, the $30 beanie-wearing glass bear tumbler sparked long lines, sellouts, and even in-store scuffles before Starbucks stepped in with an apology.

“The excitement for our merchandise exceeded even our biggest expectations,” the company said in a statement to People. “Despite shipping more Bearista cups to our coffeehouses than almost any other item this holiday season, the Bearista cup and some other items sold out fast.”

Within hours of launch, frustrated fans flooded Starbucks’ social media pages and even store hotlines. Some customers waited in line before dawn and others said their stores received only a handful of cups. In one Houston location, the craze even turned physical, with police reportedly called to break up a brawl. Meanwhile, the cup is already reselling on sites like eBay, with listings topping $600.

“We understand many customers were excited about the Bearista cup and apologize for the disappointment this may have caused,” Starbucks said. While in-store customers may be upset, investors seem happy about the viral hit, as the stock has risen over 3% on Friday.

If you’re still hoping for a Bearista at market price, that may not be on order: the chain didn’t disclose how many cups were made or whether a restock is planned.

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Target tells workers to smile, wave, and greet shoppers if they come within 10 feet of them

Target just rolled out a new rule for store employees: “smile, make eye contact, and greet or wave” when a shopper comes within 10 feet — and if they get closer, within four feet, “ask whether they need help or how their day is going,” according to a new Bloomberg report.

Dubbed the “10-4 program” internally, the rule mirrors rival Walmart’s own 10-foot policy, formalizing behavior Target had previously only encouraged.

Target Mandates Worker Smiles, Friendliness to Boost Sales

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Monster surges on energy drink buzz, while Celsius sinks on distribution concerns

Shares of Monster Beverage climbed 5% after the bell on Thursday, and held most of those gains into early trading on Friday, following strong Q3 results.

The energy drink giant topped market expectations, with quarterly sales up 17% year over year to $2.2 billion and adjusted net profits growing 41% to $524.5 million — 11% ahead of Wall Street’s estimates. In the report, Monster highlighted its zero-sugar line and new product launches, with a stack of novel flavors already released this year, as bright spots.

During a call with analysts, Chief Executive Hilton Schlosberg said that the global energy drink category “remains healthy with robust growth,” The Wall Street Journal reported, adding that demand for more affordable caffeinated drinks is rising as coffee has become “really expensive.”

Meanwhile, rival beverage business Celsius saw shares fall as much as 23% on its Q3 results yesterday — despite beating expectations, with revenue jumping 173% — largely due to concerns about a change in the company’s distribution channel, as its newly acquired Alani Nu brand joins the PepsiCo distribution network.

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