Aug 7 (Reuters) – Shares of Sweetgreen slumped 15% in premarket trading on Friday, a day after the salad chain slashed its annual same-store-sales projections as consumers grew wary of fresh produce amid a wide outbreak of cyclosporiasis in the U.S.
U.S. cyclosporiasis cases have climbed to record levels this year with the current outbreak among the largest caused by foodborne illnesses in recent national history.
The illness, which can be contracted by consuming food — typically raw fruits and vegetables — or water contaminated with feces, can cause diarrhea, nausea and other gastrointestinal symptoms.
The current outbreak, tied to recalled iceberg lettuce from central Mexico, has led some U.S. consumers to buy less lettuce and avoid some restaurant chains as the outbreak raises concerns about food safety.
While U.S. health authorities are continuing to look for sources of the illness beyond iceberg lettuce, Sweetgreen has reiterated that iceberg lettuce is not used anywhere on its menu and has no indication from health authorities or its suppliers that the company is linked to the outbreak.
The company now expects a 7% and 8% decline in annual same-store sales, compared with its previous forecast for a 2% to 4% drop. Sweetgreen said its guidance reflects reduced consumer demand since mid-July due to concerns surrounding the outbreak.
For the second quarter ended June 28, same-store sales declined for a sixth straight quarter, falling 6.2%, but an improvement over the 7.6% decline a year earlier.
“Beginning in mid-July, heightened consumer concern related to the recent cyclospora headlines disrupted that momentum, and the impact to July comparable sales was about 600 basis points,” CFO Jamie McConnell said on a post-earnings call on Thursday.
“While the timing of a full recovery is difficult to predict, we are confident in our ability to rebuild momentum,” McConnell added.
Sweetgreen’s shares have fallen nearly 30% since mid-July, when concerns about the outbreak began weighing on restaurant chains that rely heavily on fresh produce.
The company, along with other salad chains, has posted notices emphasizing that it does not use iceberg lettuce to reassure customers.
Sweetgreen, which has a market capitalization of roughly $700 million, separately said on Thursday it had also recalled some jalapenos earlier this week, as health authorities are also investigating a Salmonella outbreak linked to Mexican jalapeno peppers.
(Reporting by Aishwarya Venugopal in Bengaluru; Editing by Shinjini Ganguli)
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