Sweetgreen DOES IT AGAIN
SG stock is heading to the single digits.
For the third quarter, a $0.43 loss on earnings per share came up $0.07 short of estimates, while $124M in revenue was $5.44M below the analyst consensus. Comps 6% vs FactSet 8.4%. The chain recorded a $49.3M loss from operations in the quarter despite cost-cutting measures, widening from the $32.3M loss in Q3 2021. Incurred total pre-tax restructuring and related charges of ~$11.1 million in the third fiscal quarter of 2022. “We remain relentlessly focused on continuous operational improvement and delivering exceptional service to our customers by adding the sweet touch one customer at a time. Sweetgreen is in the early stages of building a national brand that leads and defines a category, and we are excited about our expansion plans in 2023.” Despite his confidence, the company warned that its fourth-quarter results would come in on the lower end of prior forecasts. As the company previously projected a range of $480M to $500M in revenue for the year, the lower end of that range suggests a likely miss on the $488.92M analyst consensus. Like SHAK, as long as the company pushes the unit growth envelope, it will never hit its profitability targets. As of last night's close, SG had a fully diluted market cap of $2.2 billion or 4.0x 2023 sales of $640 million, representing $40% revenue growth in 2023. The street is modeling 9.3% SSS growth in 2023, and the company put up 3Q22 SSS of 6% and is guiding down 4Q22. The company is guiding to 24% unit growth next year, and SSS will likely be negative by MSD next year. That implies $573M in revenues versus the current consensus of $640MM, at 2x 2023 revenues that imply a 50%+ downside.
WEN is MIxed
To keep this simple, in periods when MCD is outperforming, WEN will struggle.
Wendy's 3Q22 Non-GAAP EPS of $0.24 beats by $0.01, but revenue of $532.6M (+13.2% Y/Y) misses by $6.01M. comps +6.9% beat FS +4.8%, with North America +6.4% FS +5.4%, and International +10.8%. Restaurant margin missed by (130bps) but adjusted EBITDA margin beat by +110bps with cost-cutting as G&A 40bps lower than expected. WEN lowers the high end of FY22 global systemwide sales growth to +6%-7% vs. prior +6%-8%, adjusted EBITDA to $490M-500M vs. prior $490M-505M and in line with FS $495.1M at the midpoint, and cash flows from operations $305M-320M vs prior $305M-325M; guides FY22 EPS $0.84-0.88 ex-items above FactSet $0.85 at the midpoint with FCF $215M-225M above FactSet $195.9M.
DASH
Further evidence that sales are slowing?
DASH'S restaurant divisions' order growth is slowing, yet the company reported that profitability in that division is improving. On the 3Q22 earnings call, CEO Tony Xu cited higher 2022 restaurant marketplace contribution profit margins due to product changes that improved Dasher retention while increasing supply hours, lowering the overall delivery cost per order. Why are those costs improving if dasher acquisition and retention are among the most significant expense categories? Slowing sales? Further evidence is that DASH is trying to keep restaurants engaged is by giving restaurants access to discounted healthcare and other benefits in an effort to help them improve hiring and retention. DASH launched Merchant Benefits on Monday. The company said it wants to help turn the tide of slowing sales by offering restaurants tools that it believes will help attract and keep workers. Here’s a look at what it’s offering and its not much:
- Healthcare: DoorDash has partnered with Sesame, a cash-pay healthcare marketplace that offers plans as low as $5 a month.
- Personal and mental health: DoorDash offers discounted subscriptions to Breathwork, an app that provides breathing exercises to reduce stress.
- Education: DoorDash is offering discounts on two food service training programs. Restaurants can get 40% off EdApp by SafetyCulture, a job training app that features courses for hospitality and retail. And they can get 15% off StateFoodSafety, an online company that offers a range of food safety certifications.
- Staffing: Restaurants can get one free month of recruiting platform Landed and four free months of team management platform 7Shifts.
The above companies will administer their services directly to DoorDash restaurant partners. To show the impact benefits can have on staffing, DoorDash published the results of a survey of 300 restaurants and restaurant workers about benefits. Workers clearly value them: Two-thirds said they’re more likely to apply for a job that offers health benefits. Eighty-six percent of those who are unsatisfied with their current benefits said they would consider staying if benefits improved. And 38% said they would take less pay for better health benefits. The Merchant Benefits program is the latest effort by DoorDash to evolve beyond a delivery provider into an all-around support system for restaurants. In February, for instance, it launched a financing arm that gives restaurants cash advances.
