Sweetgreen’s debut on the stock market Thursday exceeded expectations after raising $364 million in its IPO.
The 140-unit fast casual originally said that it would offer 12.5 million shares at a share price range of $23 to $25, but that rose to 13 million shares and an IPO price of $28. Sweetgreen then opened on the New York Stock Exchange at $52 per share and reached a high of $56 per share, valuing the company at roughly $6 billion. The stock closed at $49.50 Thursday, 76 percent above the chain’s IPO price.
Founders Jonathan Neman, Nicolas Jammet, and Nathaniel Ru, said there’s a “powerful shift” happening among consumers in which they’re increasingly interested in learning about where their food comes from and what impact it has on the environment. The chain claims it sits at the intersection of this movement.
“Over the years, fast food has become synonymous with bad food,” the founders said in a letter. “We believe this presents a massive opportunity to build a transformative business.”
The chain appears to have done so after beginning in a 560-square-foot restaurant in Washington, D.C., 14 years ago. Sweetgreen operated 29 stores at the end of 2014, but expanded to 119 within six years. Now sitting at 140, the healthy brand wants to double its footprint in the next three to five years through new and existing markets, more digital capacity within restaurants, and new formats, such as drive-thru and pickup only.
Two years ago, Sweetgreen boasted an AUV of $3 million and same-store sales increases of 15 percent year-over-year. But the pandemic weighed heavily on business in 2020, with AUV lowering to $2.2 million and comps falling 26 percent compared to 2019. Additionally, the chain revealed in October 2020 that it cut 20 percent of its corporate workforce after creating a two-year roadmap that envisioned growth in new markets, reducing menu and operational complexity, investing in store leadership, and enhancing the digital business.
Throughout 2021 business has improved, with AUV reaching $2.5 million and comps rising 21 percent. The company earned $243 million in net revenue through September 26, after making only $221 million for all of 2020. However, the company experienced $87 million in operating loss through September, after losing $142 million in 2020. Sweetgreen noted that it’s seen significant losses since it was founded, and that it’s expected to continue as it grows business, opens more restaurants, and invests in technology.
Digital sales mix 68 percent after accounting for 50 percent prior to COVID. Sweetgreen continues to invest heavily in off-premises, most notably through its recent purchase of Spyce, a Boston-based fast casual that uses a robotic kitchen to fulfill orders. The chain is in the process of determining where to introduce the automated technology, which prepares meals in three minutes or less.
Sweetgreen said it intends to use proceeds from the IPO for general corporate purposes, including working capital, operating expenses, capital expenditures, and developing technology acquired through Spyce.
The fast casual is among seven restaurants to announce an IPO this year. Others include Krispy Kreme, Dutch Bros Coffee, Portillo’s, First Watch, Panera Brands, and Fogo de Chão.
