CAVA Group: 2024 Profit Surge Meets Q2 Traffic Slowdown

Headline: Strong FY2024 Profit Print — But Q2 Traffic Weakness Is the Story#

CAVA Group [CAVA] closed FY2024 with revenue of $963.71M (+32.25% YoY) and a striking net income of $130.32M (+881.32% YoY), a swing that materially improved reported profitability and free cash flow for the year. At the same time the company has announced a slowdown in same-store sales and customer traffic during Q2, a dynamic management described as traffic-driven rather than purely price- or mix-driven. The market is now balancing the tangible improvement in FY2024 results against the operational risk implied by softening comps; the stock traded at $65.97 with a market capitalization of $7.65B at the time of these materials, reflecting a premium multiple on future growth expectations CAVA Group Q2 presentation and company materials.

What the FY2024 Numbers Show: Growth, Profitability, and Cash Conversion#

CAVA’s FY2024 financials show a clear revenue and profitability inflection from the prior two years. Revenue rose to $963.71M from $728.70M in FY2023, a growth rate of +32.25% that was driven by unit expansion and contribution from newer restaurants alongside price/mix effects reported by management. Gross profit expanded to $241.81M, producing a gross margin of 25.09%, up sharply from single-digit margins in earlier years and representing a meaningful improvement in unit economics on a consolidated basis CAVA Group Q2 presentation and company materials.

Operating income for FY2024 was $43.12M (operating margin 4.47%), and reported EBITDA was $103.79M (EBITDA margin 10.77%). Free cash flow converted to $52.90M, coming from operating cash flow of $161.03M less capital expenditures of $108.13M, an outcome that shows the business is beginning to generate incremental corporate free cash as unit economics mature and capital intensity stabilizes CAVA Group Q2 presentation and company materials.

Despite the positive headline, a close read of the income statement reveals unusual mechanics in the net income line: income before tax was reported at $59.91M, yet net income was $130.32M, meaning net income exceeds pre-tax income. That delta suggests material tax benefits, one‑time items, or non-operating gains contributed to FY2024 net income; these warrant scrutiny when assessing recurring profitability and quality of earnings CAVA Group Q2 presentation and company materials.

Quality Check — Cash Flow, Capex, and One-Offs#

CAVA’s cash flow profile in FY2024 improved noticeably versus earlier years. Net cash provided by operating activities rose to $161.03M, while capital expenditures moderated to $108.13M, producing free cash flow of $52.90M. The company repurchased $24.65M of common stock during the year and ended FY2024 with $366.12M in cash and equivalents, leaving net debt of only $12.59M on a balance sheet with total assets of $1.26B and total stockholders’ equity of $695.57M CAVA Group Q2 presentation and company materials.

Calculating simple balance sheet ratios from the year-end 2024 figures produces a stronger liquidity profile than some TTM ratios indicate. Based on the FY2024 balance sheet, the current ratio is 394.15 / 132.64 = 2.97x, and total debt to equity is 378.71 / 695.57 = 0.54x. These calculations differ from some TTM metrics reported elsewhere in the dataset (for example, a reported current ratio of 2.72x and debt-to-equity of ~57.8%), which likely reflect trailing twelve-month (TTM) smoothing or an alternative timing basis; where numbers conflict, the FY-end balance sheet provides the clearest snapshot of immediate liquidity and leverage CAVA Group Q2 presentation and company materials.

Income Statement and Balance Sheet Trend (20121–2024)#

These trends show a re-acceleration of gross margins and a swing to positive net margins in 2024, driven by improved mix, pricing, and operating leverage as the chain scaled. However, the large net income swing in 2024 relative to operating income signals items below operating profit that materially affected net earnings and therefore requires adjustment when modeling normalized profitability CAVA Group Q2 presentation and company materials.

Balance Sheet and Cash Flow Snapshot (FY2024)#

The balance sheet shows the company is not highly leveraged coming out of FY2024, with a modest net debt position and a strong cash balance that provides flexibility for openings, marketing to stimulate traffic, or potential opportunistic share repurchases. Management’s capital allocation in FY2024 included modest buybacks and continued investment in restaurant development CAVA Group Q2 presentation and company materials.

Q2 Same-Store Sales Slowdown: Why It Matters#

Management emphasized that the more important current issue is Q2 same-store sales deceleration driven primarily by customer traffic weakness, partially offset by price and product mix. This matters because headline revenue growth to date has been heavily supported by unit openings; when same-store sales slow, the incremental contribution from new restaurants must carry a larger share of overall growth and valuation expectations tied to sustainable comp growth come under pressure. Management described promotional activity, targeted value offers, and digital/off-premise investments as tactical responses to restore frequency and traffic — levers that can work but often compress margins in the short term CAVA Group Q2 presentation and company materials.

The distinction between price-driven growth and traffic-driven weakness is critical. When average check rises (via price or mix), revenue can grow even as guest counts fall; that masks the underlying demand signal. For a fast-casual operator, sustainable value lies in guest frequency and retention, which feed long-term unit economics and margin expansion. CAVA’s reported FY2024 mix and margin gains are constructive, but the Q2 traffic trend introduces uncertainty around the timing and trajectory of margin normalization across the system.

Competitive Context: Where CAVA Fits and the Pressure Points#

CAVA operates in a highly competitive fast-casual segment that includes large incumbents such as Chipotle and health-focused peers like Sweetgreen. The company’s differentiated Mediterranean positioning—emphasizing premium ingredients and customization—targets consumers willing to pay more than quick-service alternatives. That positioning supports higher average checks but also exposes CAVA to trade-offs when consumer budgets tighten. Relative to larger peers, CAVA is still in a growth phase and therefore more sensitive to local market dynamics and promotional activity from incumbents. The current traffic softness reinforces the importance of differentiators such as digital ordering experience, delivery economics, and localized marketing to sustain frequency and defend pricing power CAVA Group Q2 presentation and company materials.

Management Execution and Strategic Responses#

Management has signaled a multi-pronged tactical response: calibrated promotions to re-engage lapsed customers, targeted value initiatives to boost frequency, continued investment in digital and off-premise channels, and efforts to accelerate new-store ramp economics. The company is balancing promotional intensity against margin preservation; execution speed and the durability of frequency gains will determine whether promotions deliver sustainable comp recovery or merely transient revenue spikes that erode margin. The FY2024 financial improvement gives management runway to execute these tactics without immediate balance-sheet pressure, but execution risk remains the key operational variable for the next several quarters CAVA Group Q2 presentation and company materials.

Valuation Signals and Forward Estimates#

CAVA’s current market pricing reflects elevated expectations for continued top-line growth and margin improvement. Key multiples embedded in the dataset show a TTM price-to-sales of ~7.06x and a TTM PE of ~54.36x based on reported trailing earnings metrics. Analysts’ forward estimates in the materials show revenue rising to roughly $1.18B in 2025 and expanding toward $2.37B by 2029, with forward P/E profiles that compress over time assuming earnings scale, but still imply high growth priced into the stock CAVA Group Q2 presentation and company materials.

Two points matter for the valuation story. First, the market is pricing a path where same-store sales re-accelerate and new units reach mature economics at scale. Second, the FY2024 net income composition and the Q2 traffic issue inject near-term uncertainty into that path; if comps remain weak or promotions erode margins, the premium multiples will be difficult to justify without a demonstrable and durable recovery in guest frequency.

What This Means For Investors#

For investors, the FY2024 results deliver an encouraging sign that unit economics and cash generation can improve as the chain scales, but Q2’s traffic-driven slowdown is the primary near-term risk to that thesis. The balance sheet provides runway for tactical interventions — promotions, marketing, and targeted investments — that can restore frequency. These actions, however, can compress margins in the near term and must translate into durable guest retention to justify current valuation multiples.

Monitoring priorities over the next two to four quarters should be the trajectory of same-store sales and guest counts, the magnitude and persistence of promotional activity, and the degree to which operating leverage reappears as new units mature. Equally important is reconciling FY2024 net income to operating profitability to strip out one-time items and understand normalized earnings power.

Key Takeaways#

CAVA produced a meaningful FY2024 turnaround in reported profitability and free cash flow, posting $963.71M revenue and $130.32M net income, while ending the year with $366.12M cash and modest net debt of $12.59M. At the same time, company commentary around Q2 same-store traffic weakness introduces a critical near-term execution risk. The strategic question for management is whether tactical promotions and investment in digital/off-premise channels can restore frequency without permanently compressing unit margins. Investors should watch comp recovery, cash conversion, and the reconciliation of reported net income to recurring operating earnings in upcoming disclosures CAVA Group Q2 presentation and company materials.

Short FAQ (Featured Snippet Opportunity)#

What is driving CAVA’s recent profitability improvement? The headline improvement in FY2024 reflects a combination of unit expansion, higher gross margins (25.09%) driven by price and mix, and near-term items below operating income that materially increased reported net income; improved operating cash flow and lower net debt also supported free cash flow generation CAVA Group Q2 presentation and company materials.

Final Synthesis — Where the Story Goes Next#

CAVA’s FY2024 results demonstrate that the business can scale to improved margins and cash flow, but the company’s near-term path depends on restoring guest frequency after the Q2 slowdown. The balance sheet strength and positive free cash flow provide management latitude to pursue corrective actions, but the durability of those actions is central to whether current valuation multiples remain warranted. Over the next several quarters, investors should prioritize transparent disclosure of comp recovery, clarity on the composition of FY2024 net income, and evidence that new restaurants continue to ramp to attractive long-term unit economics without heavy reliance on recurring promotional intensity. Those data points will determine if the FY2024 profit swing represents a sustainable inflection or a partial reset masked by transitory items CAVA Group Q2 presentation and company materials.