Cava Group shares closed up 99%, nearly doubling in value, after the stock first traded on the New York Stock Exchange on Thursday.
Shares of Cava (ticker symbol: CAVA) opened at $42 per share, closed at $43.78 and continued to rise in after-hours trading from its IPO price of $22. The IPO of the Mediterranean fast-casual restaurant with 14.4 million shares was set on Wednesday. The IPO valued the company at $2.5 billion.
Cava said it plans to use proceeds from its IPO to fund new restaurant openings. The Company currently has restaurants in locations in 22 states.
Cava was founded in 2010. Customers can order pitas, bowls, and salads with Mediterranean fare like falafel, tzatziki, and lamb.
The IPO market has historically been slow this year due to decades of high inflation, rising interest rates and fears of a recession. Goldman Sachs analyst David Kostin wrote in a research note this week that only eight US IPOs totaling more than $25 million have closed this year, excluding SPACs and spin-offs.
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In an interview with Barron’s, Cava CFO Tricia Tolivar said the company is in a strong position and that this is the right time to go public.
“We have invested in an infrastructure that enables us to grow. “We have experienced tremendous growth over the past few years and we expect to continue growing in the future and we believe we are well positioned to do so,” said Tolivar. “This was the perfect time for us to go public and it seems the market was receptive to it.”
Several other restaurant chains wanted to go public this year. Panera Bread, known for serving soups and sandwiches, announced in May that it was preparing for its IPO with new leadership. Fogo Hospitality, the parent company of Brazilian steakhouse chain Fogo de Chão, is also preparing to go public, according to the Wall Street Journal.
It’s a tough IPO market, but it’s also a tough consumer environment. Consumer confidence fell last month as inflation continues to weigh on people’s pockets. But Tolivar said Cava is in a strong position to offset those inflationary pressures.
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“One of the things we’ve handled very carefully with price increases for our menus, particularly over the last few years when we’ve increased restaurant menu prices by less than 5%, has really strengthened our value proposition to our guests.” And that’s what makes us an even cheaper choice,” she said.
The company’s method of attracting customers seems to be working. According to location analytics firm Placer.ai, cava monthly visits per venue have increased year-over-year since January 2023.
“A particularly impressive achievement given the chain’s continued expansion and an indication that new locations are driving traffic despite the current economic environment,” wrote Placer.ai’s Ezra Carmel in a research note.
Write to Angela Palumbo at [email protected]