Here’s why Sweetgreen stock is up today

Shares of chain salad restaurants Sweetgreen (SG 23.68%) rose on Friday after the company released financial results for the second quarter of 2024. As of 10 a.m. ET, Sweetgreen shares were up 25%.

Increasing popularity and improving profit margins

In Q2, Sweetgreen generated $185 million in revenue. This 21% year-over-year increase is the result of same-store sales growth of 9% and new restaurants in the system — four new locations opened in Q2 alone.

CEO and co-founder Jonathan Neman attributed Sweetgreen’s growing popularity to the new menu items, saying, “Sweetgreen’s expanding menu is hitting the mark with customers.”

Hitting the mark with customers also leads to better profit margins. Sweetgreen still had a Q2 net loss of $14.5 million. But this negative profit margin of 8% was much improved from the negative profit margin of 18% in the year-ago period. And that explains some of today’s investor excitement.

What’s next for Sweetgreen?

Sweetgreen’s management modestly raised its full-year financial guidance in light of its second-quarter results. For example, it believes it could generate as much as $680 million in revenue this year; before, he thought $675 million was the most he could raise. That’s good.

However, in conclusion, there is still work to be done. To be clear, Sweetgreen should be commended for its Q2 results — many of its operating expenses, including labor, were down as a percentage of revenue compared to the year-ago period. This is crucial. If the company can continue to open new locations while keeping expenses (especially corporate expenses) under control, then perhaps the business can turn the corner on profitability in the near future.

Sweetgreen’s Q2 financials represent a big step forward, which is exciting. But it still has a lot of work to do, giving investors something to watch.