Sweetgreen cuts 2026 sales outlook on cyclospora outbreak fears

Sweetgreen lowered its full-year sales forecast on Thursday, telling investors that consumer fear of the summer cyclospora outbreak has cut demand for its salads, even though the chain has not been linked to any of the illnesses.

For 2026, the company now projects that comparable restaurant sales could shrink 7% to 8%, a steeper drop than it had signaled before. Its previous forecast had anticipated declines of 2% to 4%. The chain attributed the reduction to weaker demand for fresh prepared foods since the outbreak spread in mid-July.

The revision also turned a modest profit forecast into a projected loss, with the company now expecting an adjusted loss before interest, taxes, depreciation and amortization of $23 million to $27 million for the year, reversing an earlier range of positive $1 million to $6 million.

Fallout from an outbreak elsewhere

The outbreak that has weighed on the chain has sickened at least 10,000 people and led to two deaths, according to the Centers for Disease Control and Prevention. The Food and Drug Administration has pointed to iceberg lettuce from a Taylor Farms facility in central Mexico as the likely culprit, and the contaminated products have been recalled.

As of early August, the agency counted 10,468 laboratory-confirmed cases and 12,255 probable cases since May 1, roughly 22,700 in all, with infections reported in 47 states. It recorded 517 hospitalizations. The two deaths, both in Michigan, involved people with underlying health conditions, the state's health department said.

The largest of the outbreaks under federal investigation has been tied to shredded iceberg lettuce served at Taco Bell. Taylor Farms recalled iceberg lettuce sourced from central Mexico on July 17, a recall that reached retail and foodservice customers across 28 states and included bagged Marketside salads sold at Walmart.

We are updating our full year guidance to reflect the impact of the Cyclospora outbreak and a range of potential recovery outcomes.

Management said the full-year guidance assumes 600 to 700 basis points of comparable-sales pressure in the third quarter from cyclospora headlines, and it set restaurant-level margin at 10.5% to 11% for the year. The low end of the outlook assumes a partial recovery in the fourth quarter, while the high end assumes a return to pre-disruption trends by the start of that quarter.

What the second quarter showed

Sweetgreen reported the quarter after the closing bell. Revenue rose 4% from a year earlier to $192.7 million, while comparable restaurant sales fell 6.2%. The company posted a net loss of $26.3 million and adjusted EBITDA of negative $0.2 million, down from a $6.4 million profit a year earlier, with an operating margin of negative 14.2%.

The quarter ended June 28, before the outbreak news spread widely. The 6.2% same-store decline was an improvement from the 7.6% drop a year earlier, and management said transactions strengthened through the period before the mid-July shock. Free cash flow was negative $10.57 million, a slight improvement from a year earlier.

The report also came in below Wall Street estimates. Revenue of $192.7 million fell short of the $193.9 million analysts had expected, and the per-share loss of 22 cents was wider than the 15-cent loss forecast, according to StockStory. Full-year adjusted EBITDA guidance of negative $25 million at the midpoint sat well below an analyst estimate near $2.3 million.

The stock dropped 16.8% after the guidance cut and earnings miss, and analysts do not expect the company to turn a profit this year.

Fear that crosses brands

Sweetgreen is not the only chain reporting damage from an outbreak it was not part of. Chipotle Mexican Grill said in late July that cyclospora fears cut about 2 percentage points from its sales in the second half of that month, even though its supply was not tied to the recalled lettuce.

Salad and Go, a chain that was already struggling, filed for Chapter 11 bankruptcy protection on Tuesday, citing consumer mistrust from the outbreak as a factor that worsened its problems.

We are not satisfied with where we are today, but we have made the hard choices to center the organization on our core. We are beginning to see encouraging signs that the work is taking hold.

Neman, who co-founded the company in 2007 with two fellow Georgetown University graduates, pointed to wraps as a bright spot. The item made up about 20% of the menu mix in the quarter and helped lift transactions, the company said, part of what it described as improving execution.

Plans for a slower build

Sweetgreen plans to keep opening restaurants at a conservative pace, similar to or slower than this year's, while it reworks its store prototype and unit economics. It ended the quarter with 285 locations, up from 260 in the same period last year, a build that management is now slowing as it rebuilds restaurant-level profit.

For the full year, the company now anticipates about 13 net new restaurant openings, roughly half of them using its Infinite Kitchen format. It also expects to roll out a redesigned version of its Create Your Own test by year-end, provided that customer response holds up.

Where the outbreak stands

Health officials are still working to trace the surge in cyclospora cases. The FDA is investigating six separate outbreaks and has identified a likely source for only the largest, the shredded lettuce tied to Taco Bell, according to a Today report on the federal data. The others remain unexplained.

The agency has not said where the other five outbreaks are located or what is behind them, and investigators are still examining whether lettuce is driving cases elsewhere in the country.

In the cluster tied to Taco Bell, 1,947 infected people reported exposure across nine states, with illnesses beginning June 22, the CDC said in an August 5 update. At least 98 hospitalizations have been linked to that specific cluster. The case against the lettuce rests on traceback and patient interviews, not a laboratory finding in the food.

What is not yet known

How quickly Sweetgreen recovers is unclear. The company said the pace and timing of a rebound remain uncertain, and its guidance spans a range that depends on how long diners stay away from fresh produce. It did not say when demand might return to normal, and management framed the recovery as difficult to predict.

Over the past 12 months, Sweetgreen recorded $681.8 million in revenue. Sell-side analysts expect revenue to grow about 7.3% over the next year, a slowdown from the chain's pace over the last seven years, according to StockStory. The deceleration comes as the company works to bring guests back and rebuild margins.

The revised guidance shows how quickly the outlook changed. First-quarter revenue had fallen 2.9% from a year earlier, and the second quarter showed a narrowing same-store decline of 6.2%, better than the year before. The July disruption pushed the full-year comparable-sales forecast to a drop of 7% to 8%, from the earlier 2% to 4%.

For diners, the outbreak has changed what goes on the plate more than what it costs. Fear of fresh produce, not any price increase, is what the salad chains have named as the drag on traffic this summer.

Whether Sweetgreen's numbers recover in the fourth quarter, as the top of its range assumes, depends on the outbreak easing and on diners returning to salads. Management said it is watching for that recovery, but it has not put a date on it, and the low end of its guidance assumes the pressure lingers.