Sweetgreen has revised its full-year sales outlook downward amid growing consumer concerns about fresh produce due to a nationwide cyclospora outbreak. The salad chain’s shares plummeted over 15% in after-hours trading following this announcement.
Although Sweetgreen has not been directly linked to the outbreak—which has affected at least 10,000 individuals and resulted in two deaths—the company cited decreased customer demand for fresh prepared foods, pointing to a specific issue with contaminated iceberg lettuce linked to a Taylor Farms facility in Mexico. The Food and Drug Administration has confirmed this source, and a recall of affected products is underway. The only major restaurant chain currently associated with the outbreak is Yum Brands’ Taco Bell, which is witnessing a rebound in sales.
In light of the continuing impact of public health concerns, Sweetgreen now anticipates an annual decline in same-store sales of 7% to 8%, a significant adjustment from its earlier projection of a 2% to 4% decrease. Additionally, the company is bracing for an adjusted loss before interest, taxes, depreciation, and amortization ranging between $27 million and $23 million, compared to its prior forecast of modest earnings.
The cyclospora outbreak has also affected other chains, with Chipotle Mexican Grill reporting a 2 percentage point sales impact in late July due to fears surrounding the parasite. Salad and Go, facing ongoing struggles, recently filed for bankruptcy, citing similar consumer distrust stemming from the outbreak.
Why this story matters:
- Indicates broader impacts of health crises on consumer behavior and restaurant sales.
Key takeaway:
- Sweetgreen’s financial outlook has significantly worsened due to fears surrounding a foodborne illness outbreak.
Opposing viewpoint:
- Other chains like Taco Bell have managed to recover, suggesting varying impacts within the restaurant industry.
