Trendy salad chain Sweetgreen is seeing a lot of green in its stock charts Friday, despite a fourth-quarter earnings report that put its bottom line solidly in the red.
The stock jump—up more than 16% in midday trading—was likely driven by strong sales growth, with revenue up 63% year-over-year to $96 million for the last quarter of 2021, compared to $59 million for the same period in 2020. (This beat Wall Street expectations of $85 million.) Sweetgreen outposts also performed well, with restaurant-level profits rising to $12.3 million with a margin of 13%, compared to net losses and a negative margin the year before. The company attributed those successes to price hikes and killing off its loyalty program, along with an increase in orders in urban areas as white-collar workers head back to the office post-omicron shutdowns.
However, Sweetgreen’s overarching financials showed a continuation of its multi-year money-losing streak, with a total net loss of $66 million. That was up (or down) from a net loss of $41 million in the prior year period. The whole year’s losses widened from $141 million to $153 million. And while the company projected optimism in its 2022 outlook, it noted that it doesn’t expect to turn a profit; it hasn’t, in nearly a decade.
The way in which investors and venture-capital backers alike have seemed to overlook this glaring flaw in the business is perplexing. The buzzy company, which was founded in 2007 as a fast-casual restaurant with a buffet of lettuces, fruits, and whole grains, enjoyed a blockbuster debut on the New York Stock Exchange in November, when its stock popped over 80% at opening. It has raked in round after round of funding—its latest two brought in $350 million from Series H and Series I, a long way from the initial A, B, and C raises of fledgling startups. Analysts suspect that it’s been buoyed by an unsinkable “cool” factor among the millennial yuppie elite, along with fellow money-losing darlings like Allbirds and Warby Parker.
But that life-raft may be wearing away as investors have begun to question the scale-first-profit-second model, especially when there are no profits in sight. Sweetgreen’s stock has fallen nearly 50% over the past months; Allbirds and Warby Parker, which also debuted last autumn, are down 78% and 52% respectively.
Nevertheless, Sweetgreen CEO Jonathan Neman is forging ahead. The chain will open at least 35 new locations this year, and Neman has said he hopes to make it into the McDonald’s of his generation.