Why Sweetgreen is down 17% this week

The restaurant sector took a bit of a hit this week with shares of Sweetgreen (SG -1.45%) taking the brunt of the move on news that consumers are cutting back in many areas. Cava Groupanother high-growth chain, also fell this week, but Sweetgreen’s move hit double digits.

According to data from S&P Global Market Intelligence, Sweetgreen shares are down 17.4% this week as of 1 p.m. ET on Friday, and a recovery may not be around the corner.

Questions about the consumer

There hasn’t been any big news about Sweetgreen specifically, but this is a highly valued company that is still losing money, so if the macro environment turns weaker, that could affect how investors view the stock over the long term. And this week has not been good for that macro view.

general dollar, Lululemon Athleticaand The ultimate beauty all reported relatively weak earnings, and the theme of those reports was a struggling consumer. Spending doesn’t stop entirely, but consumers, especially those on the low end, are trading down and even forgoing some purchases as inflation and the lack of higher earnings have curbed spending.

Sweetgreen’s finances

One of the easiest things to cut back on is dining out, and that’s what investors are worried about. Sweetgreen still has a whopping $3.6 billion market cap, but only $649 million in revenue over the past year and is losing money.

SG Revenue (TTM) data by YCharts

These are the financial statements of a company to take a risk in today’s economy and investors have reacted accordingly. I’m definitely not a buyer of this pullback and think Sweetgreen has a lot to prove to regain investor confidence.