Editor’s Note: This story has been updated with additional information.
Cava Group (NYSE:CAVA) has quickly emerged as a formidable player in the restaurant industry, with some speculating it could rival the success of Chipotle Mexican Grill Inc. (NYSE:CMG).
But what's behind this surge, and does Kevin Miles’ legacy at Zoës Kitchen hold the key to its future success?
The Cava Explosion: The Mediterranean fast-casual brand has been making headlines with its explosive stock performance and investor interest.
Since its public debut in June 2023, Cava's market capitalization has skyrocketed to over $17 billion, more than five times its initial valuation.
Its stock has surged by 268.24% year-to-date, significantly outperforming the Nasdaq 100 index's 29.5% gain during the same period.
Last month, in the third-quarter results, Cava posted earnings of 15 cents per share, surpassing analyst estimates of 11 cents. It also reported sales of $243.82 million, exceeding expectations of $233.59 million.
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These strong results align with Cava's expansion plans, as the company continues to open new locations, expanding its footprint across the U.S.
As it grows, the question on investors' minds is whether Cava can sustain this momentum and eventually challenge the dominance of Chipotle Mexican Grill.
The fast-casual dining sector has demonstrated significant profitability, as seen in Chipotle’s impressive 700% stock growth over the last decade.
Chipotle shares have risen by 45.26% year-to-date, according to Benzinga Pro. It currently has a market cap of $88.86 billion.
Like Chipotle, Cava uses an efficient operational model, focusing on customizable, fresh meals in an assembly-line format.
Additionally, while competitors like McDonald’s Corp. (NYSE:MCD) have raised prices significantly, Cava has kept its price hikes minimal, planning only a 3% increase for 2024.
The Kevin Miles Legacy: Miles spearheaded Zoës Kitchen from 2012 through 2018, until it was acquired by Cava.
Miles rose through the ranks at Zoës Kitchen – he was with the company for nearly a decade. While he joined it as executive vice president of operations in 2009, Miles’ went on to head the company within three years.
As its CEO from 2012 to 2018, Miles expanded Zoës Kitchen’s footprint from 21 locations across seven states with $24 million in revenue to 268 locations generating $340 million a year.
However, in 2018, Zoës Kitchen was acquired by Cava, and Miles left the company.
The acquisition added over 250 locations to Cava's portfolio, expanding its footprint across the U.S., particularly in suburban markets where Zoës had established a presence.
The integration, however, was not without challenges. Cava's startup mentality clashed with Zoës' struggling financial state and low employee morale. Despite these cultural hurdles, Cava's CEO Brett Schulman previously described the process as "painful" but transformative.
By converting many Zoës locations into Cava-branded restaurants, the company streamlined operations and capitalized on existing customer bases, while phasing out underperforming locations.
Over time, this strategy contributed to revenue improvements and bolstered investor confidence, particularly following Cava's IPO in 2023.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
Photo courtesy: Cava
