Shares of Sweetgreen (NYSE: SG) surged on Friday after health officials identified another restaurant chain as the likely source of a widespread cyclospora illness outbreak.
The Centers for Disease Control and Prevention told consumers to avoid shredded iceberg lettuce served at Taco Bell restaurants across five states.
A Food and Drug Administration investigation reportedly traced the outbreak back to one of Taco Bell’s suppliers, shifting scrutiny away from Sweetgreen entirely.
Prior to Friday’s rally, Sweetgreen’s stock had shed roughly a quarter of its value amid intense investor concern over the fast-spreading cyclospora parasite.
The intestinal illness is known to spread through contaminated fresh produce, making salad-focused restaurant chains like Sweetgreen particularly vulnerable to consumer fear.
Investors had worried that customers would avoid Sweetgreen locations out of concern that its salads could be a vector for the parasite.
Friday’s CDC announcement offered shareholders a significant measure of relief, sending the stock sharply higher as the immediate reputational threat appeared to subside.
However, Sweetgreen (NYSE: SG) was already navigating a difficult operating environment well before the cyclospora scare emerged as a concern.
The fast-casual chain reported a same-store sales decline of 12.8% in the first quarter, driven by an 11.2% drop in customer traffic.
Higher energy costs have weighed heavily on consumers’ budgets, forcing many households to reduce discretionary spending including visits to restaurants.
The broader macroeconomic pressure on consumer spending continues to pose a meaningful challenge for Sweetgreen as it works to rebuild traffic and sales momentum.
Investors will be watching closely when Sweetgreen reports its second-quarter financial results on August 6, looking for signs that the company’s recovery efforts are gaining traction.
The upcoming earnings report will serve as a key test of whether Sweetgreen can stabilize its business amid both economic headwinds and the reputational fallout from the outbreak scare.
