Sweetgreen's 2025 Sales Miss Highlights Turnaround Struggles Amid Automation Push

What happened

Sweetgreen, a fast-casual salad chain with a strong digital brand and automation roadmap via Infinite Kitchen, has faced persistent profitability challenges, as detailed in recent SEC filings showing Q3 2025 net losses and variable traffic. A Wall Street Journal article now reports that 2025 sales fell short of expectations despite price hikes intended to counter cost pressures like California's $20 minimum wage and commodity volatility. This sales decline underscores ongoing demand softness, which management has attributed to macro conditions and loyalty program transitions but reveals deeper issues with consumer elasticity. The company is accelerating its transformation, including the sale of its Spyce automation unit to Wonder to reduce development burden, but execution risks remain high. Overall, this news confirms that Sweetgreen's turnaround efforts are not yet offsetting fundamental weaknesses in traffic and revenue growth.

Implication

The sales shortfall indicates that Sweetgreen's price increases are failing to drive revenue growth, highlighting poor price elasticity and persistent traffic issues. This validates DeepValue's watch items on same-store sales and traffic variability, suggesting that macro and loyalty transition impacts are more severe than portrayed. Execution of the Infinite Kitchen rollout and Spyce sale to Wonder becomes even more crucial, as any delays or inefficiencies could exacerbate margin pressures. Without clear evidence of sustained comp growth and margin improvement from automation, the path to profitability remains uncertain and cash burn risks linger. Investors should closely monitor upcoming quarters for signs of operational traction or further deterioration before considering a rating change.

Thesis delta

This news does not fundamentally shift the HOLD thesis but amplifies downside risks by exposing Sweetgreen's inability to monetize price hikes amid weak demand. It underscores that the company's turnaround is more fragile than filings suggest, making successful execution of Infinite Kitchen and cost management imperative to avoid a downgrade to SELL if trends worsen.