Food stocks are crashing and not just because of Trump's tariffs

Upscale fast-casual restaurant chains have been on fire in recent years, but as economic uncertainty spreads, these high-flying stocks may have hit a wall.

Look no further than Cava (CAVA). The Mediterranean fast-casual chain dropped 10% after its latest earnings, despite beating Wall Street’s expectations on both Q4 and full-year 2024 growth.

Cava reported 21.2% same-restaurant sales growth in Q4, easily topping the 17.73% projection. For the year, same-restaurant sales jumped 13.4%, also ahead of estimates.

Total revenue surged 28.3% year-over-year to $225.1 million, up from $175.5 million. Meanwhile, foot traffic climbed more than 15%, a strong indicator of continued demand.

But those numbers weren’t enough.

Cava’s adjusted EPS landed at $0.05, missing Wall Street’s $0.07 target. And its 2025 guidance spooked investors even more — same-restaurant sales growth is expected to slow to 6%-8%, well below Wall Street’s 8.7% forecast.

Its adjusted EBITDA outlook of $150M-$157M also underwhelmed, falling short of FactSet’s $165.2M estimate.

CAVA shares plunged 10% in after-hours trading following the report before paring some losses to close down 4.3%.

A victim of its own success?

Wall Street has piled into fast-casual restaurant stocks in recent years, betting big on Cava, Chipotle (CMG), Shake Shack (SHAK), and Sweetgreen (SG).

These brands have won over diners looking for a premium alternative to fast food staples like McDonald’s, Burger King, and Taco Bell. As a result, CAVA surged 97% over the past 12 months.

After fast-casual valuations soared to tech-stock levels, investors are quick to punish any sign of slowing growth. The stock is down 12% this year and 30% in February alone.

With such lofty expectations, Wedbush analysts warned that Cava’s Q4 earnings had little room for error. And despite solid results, its 2025 guidance was enough to shake investor confidence.

It’s not just Cava feeling the heat. Sweetgreen (SG) has lost half its value since late November after a 300% surge last year.

“Valuations are pretty stretched, and all the signs have been pointing toward a market correction,” Morningstar analyst Sean Dunlop told Barron’s.

Cava and its fast-casual peers aren’t just battling investor expectations — they’re facing real economic headwinds.

Trump’s tariffs could drive up food costs, cutting into margins for restaurants that rely on imported ingredients. Meanwhile, inflation remains sticky, and fears of a recession continue to grow.

If consumers tighten their wallets, the foot traffic that fueled fast-casual’s rise could start slowing—just as investors lose patience.