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CAVA Group (CAVA) has been trading to new post-IPO highs this week. And with it being a slow news day, we wanted to profile this Mediterranean fast-casual restaurant chain. CAVA's goal is to create the next large scale cultural cuisine category. Its customers span gender lines and age groups, but CAVA has a strong Millennial and a growing Gen Z contingent.

• CAVA believes it is in the early stages of fulfilling its total restaurant potential. CAVA sees an opportunity for more than 1,000 CAVA restaurants in the US by 2032 vs ending 2023 with 309 locations. Its acquisition of Zoes Kitchen in 2018 allowed CAVA to rapidly expand in new and existing markets by converting Zoes Kitchen locations to the CAVA brand, which has now been completed.
• Over 85% of its restaurants are in the suburbs. Most of its restaurants are in the Southeast, across the Sunbelt, and in the West. However, CAVA recently made its first foray into the upper Midwest, including Chicago and its suburbs.
• At a recent investor conference, the company explained that the Mediterranean diet has been the number one ranked diet seven years in a row. However, despite the health halo associations with Mediterranean cuisine, it is very underserved in the US from a restaurant cuisine category. CAVA also says it is benefitting from the country becoming more diverse and as that happens, people's palates are shifting. They are seeking bolder, more adventurous flavors but they don't want to sacrifice health.
• CAVA makes the point that this translates to incredible broad appeal across both lunch and dinner. CAVA allows customer to build a bowl to any dietary needs and preferences. Customers can eat vegan or vegetarian, or maybe they want to eliminate lactose or gluten, or they just want spicy options.
• Importantly, CAVA says its offering appeals across the income strata. The traditional full service dining model is struggling to deliver a compelling value. At the same time, fast food has been raising prices in recent years. However, consumers are saying, for $1-2 more or even the same price, they can have a healthy meal at CAVA, a great bowl of fresh food. CAVA feels it sits at the nexus of that, the convergence coming down from the higher end full service and coming up from lower end fast food.

In late May, CAVA reported Q1 results, its largest EPS beat in the last three quarters. Revenue rose a healthy 27.5% yr/yr to $259 mln. However, Q1 comps at +2.3% were maybe a bit disappointing following a +11.4% comp in Q4 and +17.9% comps for all of 2023. In fairness to CAVA, it was lapping a huge +28.5% comp last year when there was a lot of buzz around the brand as it was preparing for its IPO debut in June 2023. Also, it was good to see CAVA increase its FY24 comp guidance to +4.5-6.5% from +3-5%. That tells us that CAVA's Q1 comps were perhaps better than internal expectations. Overall, CAVA is a name worth keeping on the radar.