U.S. — Sweetgreen cut its full-year outlook and revised its 2025 same-store sales forecast to a 7%–8% decline after consumer demand dropped due to the multistate cyclospora outbreak, despite not being implicated in the incident. The fast-casual chain expects to report an adjusted loss before interest, taxes, depreciation and amortization of $23 million to $27 million, a reversal from its previous forecast of earnings of $1 million to $6 million.

Shares of Sweetgreen fell more than 15% in extended trading following the earnings report, extending a slide that has seen the stock fall nearly 30% since mid-July. The company stated that consumer concerns about the outbreak had about a 6 percentage point impact on same-store sales in July.

The financial revision comes as the Food and Drug Administration identified iceberg lettuce processed at a Taylor Farms facility in central Mexico as the likely source of the cyclospora outbreak. Cyclospora is a water-borne parasite that typically spreads through contaminated produce, and the outbreak has sickened at least 10,000 people and resulted in two deaths. Taylor Farms voluntarily recalled products supplied from its central Mexico facility, and the FDA is working with the company to determine if any contaminated lettuce remains on the market.

Yum Brands' Taco Bell is the only national restaurant chain linked to the multistate cyclospora outbreak, as the brand uses iceberg lettuce frequently across its menu. Yum Brands executives stated in late July that Taco Bell's business was recovering after an initial drop in sales and traffic. Sweetgreen has not been implicated in the cyclospora outbreak, and CEO Jonathan Neman stated that the company's restaurants have never served iceberg lettuce and only source lettuce grown in the U.S.

"The Company's updated outlook reflects reduced consumer demand for fresh prepared foods due to the multistate outbreak of cyclosporiasis since mid-July," Sweetgreen said in a statement. "The pace and timing of recovery remain uncertain." Sweetgreen CFO Jamie McConnell said, "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." During the earnings call, Sweetgreen execs received a number of questions about how it is using promotions to bring customers into the business.

The broader salad industry has faced headwinds as consumers reacted to the health alerts. Traffic to Chopt Creative Salad Co. locations fell 24% on July 18, according to Placer.ai data. Dollar sales of prepackaged salads decreased 14% during the four weeks ended July 25 compared with the year-ago period, according to NielsenIQ data. Chipotle Mexican Grill CFO Adam Rymer stated that sales softened by about 200 basis points in the second half of July due to cyclospora concerns.

Competitors have moved to reassure customers regarding their safety protocols. Just Salad founder and CEO Nick Kenner posted on LinkedIn detailing the chain's food safety measures, including peeling and discarding the outer leaves of romaine and kale and double washing the leaves. Chopt posted on Instagram stating, "Food safety has always been at the heart of how we operate. We promise to continue monitoring guidance from public health officials and remain committed to earning your trust every time you choose Chopt." Michigan reported more than 12,400 cases and two deaths related to the outbreak, though the Michigan Health Department stated that the precautionary recommendation to avoid bagged salad mixes is no longer in effect.

Salad and Go filed for Chapter 11 bankruptcy and closed all of its locations. Salad and Go stated that the cyclospora outbreak exacerbated its existing business challenges. Sweetgreen's same-store sales fell 6.2% in the second quarter ended June 28, prior to the peak of the outbreak headlines. The FDA is tracking at least six other active outbreaks without a clear culprit.

Why It Matters

The cyclospora outbreak has triggered a sector-wide decline in fresh food sales, impacting chains like Sweetgreen and Chipotle despite no direct implication in the contamination. This pattern of reduced consumer demand forced Salad and Go into bankruptcy and caused Sweetgreen to shift its financial guidance from projected earnings to a significant loss. The situation shows how health alerts linked to specific ingredients can destabilize the broader salad industry, altering revenue forecasts and stock valuations across multiple brands. The outbreak has resulted in two deaths.