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This fast food restaurant operator with a focus on salads and bowls is sharply higher for the second quarter in a row following its Q1 report last night. SG reported a larger than expected loss, but beat on revenue. SG also raised FY24 guidance for sales to $660-675 mln from $655-670 mln and for adjusted EBITDA to $10-19 mln from $8-15 mln.

• The company is not yet profitable partly because it's building new locations at a good clip, but adjusted EBITDA turned positive to $0.1 mln from $(6.7) mln a year ago.
• What really stood out were impressive Q1 comps at +5%, nicely above the +3% comp guidance. The comp increase was driven by a 5% benefit from menu prices while traffic was flat. Comps improved sequentially each month within the quarter. Its Q1 traffic was impacted both by January weather and the inclusion of two additional holidays in the quarter. Importantly, SG raised its FY24 comp guidance to +4-6% from +3-5% prior guidance.
• One area where Sweetgeen really excels is digital orders. In 2023, total digital sales represented a whopping 59% of total revenue, with over 60% of that coming from SG's own digital channels. In Q1, 59% of sales were digital, with 56% of those sales coming via its own digital channels. Other than Wingstop (WING), which posted 68% digital sales in Q1, we cannot think of a higher percentage. Sweetgreen deserves credit for this as it really pushes online sales.
• In terms of its menu, Sweetgreen has historically been known as a salad company but it has been aiming to broaden its appeal. In October, it launched protein plates featuring new proteins such as herb roasted chicken and miso glazed salmon. Protein plates continued to over-index at dinner in Q1. In February, SG launched a test of its caramelized garlic steak across the Boston market.
• In terms of building new locations, SG expects to add 23-27 new restaurants in 2024 to its current 225 locations. They will be weighted toward the back half of the year. SG sees tremendous whitespace opportunities across the US in both new and existing markets. Starting next year, it plans to return to a growth rate of 15-20% new unit growth, with 2025 around 15% and 2026 and beyond at 20%. In Q1, SG opened six new restaurants, including two in a new market, Seattle.

Overall, this was another impressive quarter for Sweetgreen. Investors appear to be reacting mostly to the impressive comps, which were strong despite tough January weather. We wish traffic played a bigger role in the comp growth, but they were still good comps. We also like that SG raised full year comps. Sweetgreen generated a lot of excitement when it made its IPO debut in November 2021. The concept is pretty compelling as it's a play on consumers wanting to eat healthier while offering the convenience of a quick meal. Unfortunately, some poor earnings results sent the shares to a low of $6.10 by March 2023. However, the last two quarters has shown that the brand is turning around.