Investing

Restaurant Chain Cava Confidentially Files for IPO on SEC's 'Secret Menu'

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Investors hungry for a taste test of this year’s restaurant offerings will soon have something to savor. Yet the wait isn’t quite over – the first restaurant sector filing for 2023 has gone to the Securities and Exchange Commission (SEC)’s secret menu.

Cava issued a press release on Monday, February 6, announcing it has confidentially filed a draft registration with the SEC for an initial public offering (IPO). The total number of share units to be sold and the price range for the offering have not yet been disclosed.

The fast-casual Mediterranean-style chain first opened its doors in 2011, offering diners customizable grain bowls, salads, and pitas in the build-your-own meal style of Chipotle Mexican Grill. The brand also sells its line of dips and spreads, including spicy hummus, harissa sauce, red pepper feta dip, and tahini dressing, at grocers like Whole Foods.

Cava has seen healthy profits in recent years, reaching $168 million in same-store sales in 2021, representing 37% year-on-year revenue growth. It has over 300 branches and is continuing to increase its total store tally. Since acquiring Zoë’s Kitchen for $300 million in 2018, Cava has been converting its subsidiary’s preexisting infrastructure into new restaurant units, increasing its presence deeper in suburban areas. It was valued at $1.3 billion in Q2 of 2021.

Restaurants Warm Up

IPOs went into hibernation last year amid a bearish downturn in the broader equities markets. The flow of companies going public dwindled to a trickle – the slowest IPO year in over three decades, according to Renaissance Capital. Whereas 2021 saw 397 deals raise $142 billion, there were just 71 deals last year, raising roughly $8 billion.

Although a date has not been revealed, Cava is tipped to hit the market in the first half of 2023, along with Brazilian steakhouse chain Fogo Hospitality and bakery chain Panera Bread, according to a recent Wall Street Journal report.

The expected string of restaurant deals may warm investors up for more growth from the sector as last year’s IPO freeze starts to thaw. Dining revenue has remained relatively steady, despite a downturn in U.S. consumption. Restaurants are in reasonably good financial shape too. After cutting costs during the pandemic squeeze, many restaurants’ margins have risen and could improve further inflation eases, the Journal reported.

Publicly-traded restaurants have shown resilience during the market retreat. The S&P 500 Restaurants Subindex, which tracks the most prominent players in the industry, is up roughly 5.6% over the past twelve months. The broader S&P 500, meanwhile, declined by 8% over the period.

Among the best performers of food listings are Chipotle Mexican Grill (CMG) and Starbucks (SBUX), both of which have seen their stock prices grow by over 10% in the past year.

Investors looking to add restaurant exposure to their portfolio will likely keep an eye out for further details on Cava’s planned deal.

This article was produced and syndicated by Wealth of Geeks.

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