Trump-Epstein Ties Back in Spotlight as Fight in Congress Looms

23:05Carol Massar:Shares of Kava slightly lower, down about a half a percent in today's session. They are down to around 56 % year to date. They are also down nearly 70 % from an all-time high last December, and nearly 15 % of the float is short. Now, keep in mind, the company did report after the close of November 5th, the stock closed down about 2.6 % the following day on that news. What the earnings news was, Cava Group cutting its full-year sales growth targets after its foot traffic stalled in the third quarter, and that added to some worrying trends that financially squeezed consumers are foregoing fast-casual restaurants.

23:38Carol Massar:To be fair, we've seen this at some other fast casual restaurants. So back with us in our latest installment of CFO Briefing, Tricia Tolliver. She is the chief financial officer of Cava, joining us from Baton Rouge, Louisiana. She will be featured in an upcoming CFO Briefing newsletter. And then also with us in studio is Nina Tretman, Bloomberg News senior editor. She writes the CFO Briefing newsletter, which you can subscribe to and find at Bloomberg.com slash CFO Briefing. Good to have you both here. Trisha, I want to start with you because we actually saw Citi come out and Kava and Sweetgreen were put on Citi's 90-day positive catalyst watch.

24:17Carol Massar:An analyst there noting that sales, he expects to improve off lows as the U.S. government likely reopens in the coming weeks. I'd love to start there. And welcome, welcome, welcome back to Bloomberg. How has the shutdown hurt business and how does it look from here on out if indeed we see the government start opening? Hi, Carol. It's good to be with you today. And certainly, as we experienced the shutdown and around the middle of October, around the time when people in the District of Maryland, Virginia stopped receiving their paychecks, we did see a slight step down in spend in those markets.

24:50Carol Massar:Certainly not anything acute, but certainly an impact that we noticed in the business overall. So as we look forward to hopefully a return to work in the near future, it's likely that it will have a benefit. But really what we're wanting to do more focused is on the long term and what that means for Kava to be able to provide incredible food, abundant offerings with amazing flavor that make you feel good while you're eating it and after. And we believe that relevance will continue to drive benefit for the business over the long term. The other thing to keep in mind is that we were actually we are anniversary or lapping very strong same restaurant sales in the prior year, fourth quarter at 21 percent.

25:30Carol Massar:And so that is what's influencing our outlook for the rest of the year in 25. And as we go into 2026, I'm looking forward to the culinary offerings that we have that we can bring to our guests every day. Tricia, thanks for joining us again. I'm just wondering in terms of your view of the consumer. We've seen restaurant chains, not just you, but also others reporting weaker results and cutting forecasts. What's your view of the consumer from here? We've heard a lot about the K-shaped economy where sort of well-off people are doing well, but the weaker income bands are just spending less. Is that something that you are concerned about?

26:05Carol Massar:Certainly, you can see from the high-frequency data with credit cards that the consumer is feeling some more pressure, as well as just the consumer sentiment in general. There have been a lot of challenges as the consumers are facing them in the near term. And as we experience those in our business, what we're finding is that consumers continue to lean into our premium items. So our amazing steak and our new chicken shawarma, as well as attaching with incremental items like our fan favorite pita chips. Right now we've got cinnamon sugar pita chips with a drizzle of honey that's incredibly tasty.

26:36Carol Massar:I'm hungry. I know, I know. I had them for lunch today, so they're incredible. But that as well as our house-made juices. So those are continuing to attach and increase. And also, when you look at our restaurants and how they're positioned based on median household income in their markets, we're finding that the lower income consumers actually experiencing in those restaurants higher same restaurant sales than the rest of our cohorts of restaurants. So from that standpoint, it's encouraging to see that we are becoming more accessible for the lower income consumer and driving increase in sales in those areas.

27:13How does the weaker results that you reported in the quarter, how does that impact your planning on future growth? Like I know that you wanted or are planning to open as many restaurants next year roughly as you open this year. Is that still the plan?

27:30Carol Massar:We do intend to continue to increase the opening of our restaurants with at least 16 percent growth in restaurants in 2026. This year we'll open at least 68 to 70 restaurants. And what we're seeing is that despite the challenges we see with the consumer today, we're very encouraged about the strength of the business and what we're able to offer. So our new restaurants that are opening or have opened in 2025, those restaurants are delivering average unit volumes above$3 million, which is above our chain average. And that really underscores the power of the brand itself, the excitement around the consumers as we come into new markets and existing markets, and gives us the confidence in our white space opportunities that we will continue to lean into our growth in new restaurants as we move forward.

28:17Certainly new restaurants are a big part of CapEx this year and next year, but where else are you investing?

28:23Carol Massar:We're always looking for ways to make our operations and our restaurants easier to run for our team members. So some of the investments we're making are in equipment in the restaurants to streamline operations like our kitchen display systems, which works with our digital ordering systems on the back of the house, which supplies our digital customers. Those tools allow our operators and team members to fill orders more easily and create a higher level of accuracy. We've also equipped our restaurants with Turbo Chef ovens. Many of our restaurants didn't have them. And in this year, we made those investments.

28:59Carol Massar:It streamlines cook times, creates better quality and efficiency, and simplifies operations for the team members overall. Our view at Kava is a happy team member equates to a happy guest and a happy P &L. And we're always looking for ways to reinvest in the business to drive that. Let's talk P &L. And I'm just curious about, you know, in your earnings, tariffs talked about how they have hit your, or you guys talked about how tariffs have hit your restaurant level profitability through higher food, beverage, and packaging costs. Is that just the new reality and new normal that will stay with us for longer or perhaps forever?

29:31Carol Massar:I'm just curious what you read on that. And then how does it play into pricing? Because I think you guys were still looking to limit price hikes now and also into 2026. But is that maybe up in the air? Yes. So tariffs have certainly been an evolving and ever-changing area. Luckily, one of our values is to act with agility. These are our team members on the supply chain side have done an incredible job in minimizing that impact as much as possible. But the tariffs did have about a 20 basis impact on our food, beverage and packaging costs in the quarter. And I expect those to continue into 2026 as well.

30:05Carol Massar:And what we've done from a pricing perspective is really try to minimize that impact. We took no incremental price in 2025 related to those incremental costs that we were incurring. We didn't believe we should put that on our guests and wanted to absorb that and try to continue to elevate our value proposition, which is quite high amongst our peers. And then as we think about it going into 2026, we're also going to be very mindful about price increases and anticipate very modest increases. Since the end of 2019 to the end of the third quarter, we've only raised price less than 10 percent below CPI or inflation and less than half of many of our industry peers.

30:45Carol Massar:And that's something that we feel very strongly about and a trend we expect to continue to do despite the pressures we may experience on our input costs. Trisha, so I get that. So it sounds like you are being incredibly and have been mindful in terms of price increases on consumers. Having said that, if no price increases, but you did say that the tariffs have hit you guys on a couple of different levels, does that mean margins take take a hit or where do you squeeze costs out? Is it workers? Is it the supply chain? Where do you squeeze price, you know, some of the cost of this out? So certainly in 25, we took no incremental price related to tariffs.

31:22Carol Massar:And in 26, there'll be modest menu price increases that helps minimize any inflation that we experience on the labor side as well as the input cost side. And then there are other opportunities from an efficiency standpoint as we grow and scale that we will continue to deploy to minimize the impact on the P &L overall. Trisha, your share price has down quite a bit this year. I'm just wondering, from a CFO perspective, is there room for shareholder returns? Like, are you thinking about buybacks? What's the measure to get your share price back up? Well, what we've always said since the beginning is this is a journey and a long-term journey overall.

31:58Carol Massar:And so while the share price can go up and down, we want to remain focused on the business over the long term and what that we can do to make sure that we drive that. And we stay focused on our strategy and committed to that. We'll always explore opportunities to strengthen and maximize those returns. And right now, we're just going to continue to remain focused on the strategy we have at hand, and that is opening and expanding the Mediterranean way across the country and running great restaurants every location, every shift, and deepening personal relationships with our guests with the high-performing team.

32:29You have stores in more than a dozen states in D.C. So this question is dependent on geography. But in general, the labor market right now, our team has reported on Walgreens cutting pay for hourly workers after its private equity buyout. Is the labor market better for hiring people right now?

32:48Carol Massar:You know, we're in 28 states in the District of Columbia across the country, and the labor market is one that we keep a very close eye on. And our focus is making sure that we're paying a very fair wage in every market across the country. So I work closely with our operations and people and culture team on a quarterly basis to evaluate our wages to make sure that we're in the top quartile of pay so that we don't have as much pressure on wage and can bring on high quality team members that can lead the future growth of our business overall. All right. Next time you have to send us some pita chips.

33:19Carol Massar:I'm just going to say, am I allowed to say that? We can go get them. We could. Why didn't we do that? I'm just kidding. I'm just kidding. You're right. We could just scoot out out here on a park at not park. But is it third or Lexington? There are a lot of stores. I'm looking at the website right now. There are a lot of stores in New York around us. Hey, listen, Trisha. 708 third. Check it out. Trisha, thank you so much. Trisha Tolliver back with us. Chief Financial Officer of Cava joining us from Baton Rouge, Louisiana. And of course, our thanks always to Nina Trentman, Bloomberg News Senior Editor.

33:49Carol Massar:She writes the CFO Briefing newsletter. You can subscribe to it at Bloomberg.com slash CFO Briefing, and a new one comes out every Sunday. Stay with us. More from Bloomberg Business Week Daily coming up after this. Support for the show comes from Public.com. If you're actively involved in your portfolio, you probably catch yourself repeating the same actions, buying the dip, manually sweeping idle cash, putting on a hedge. On public, you can now create AI agents that handle all these tasks on your behalf. Just describe what you want to do in plain English. Like, if the VIX hits 25, buy a put option on the S &P 500.

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38:16on The Terminal. It's about how more Americans than ever, Carol, are falling behind when it comes to those car payments.

38:22Carol Massar:I got to say, we've been talking about this a lot today. With ongoing inflation pressures and the return of student loan bills, millions of car owners are struggling to afford their monthly payments. It's the latest sign of weakness in the United States in the economy as the Fed considers the path of future rate cuts. So we wanted some help with what this economy really looks like. We turned to a friend of the program. He's the author of The Confidence Map, Charting a Path from Chaos to Clarity. It's a book that digs deep into decision making. It is super great to have back with us Peter Atwater, President of Financial Insights and Adjunct Lecturer of Economics at the College of William & Mary.

38:57Carol Massar:He joins us from our Bloomberg, Washington, D.C. Bureau. You've been such a good friend, actually, to Bloomberg today. I know we've had you on. I think you've been on on The Balance of Power. You're going to be on later on on BTV. But we're really glad because this big take, and I feel like your thoughts around this, How many years ago, when you started talking about a K-shaped economy, I feel like this is something that the economy, maybe not yet quite markets, but politics, like it is front and center, Peter. So where are we with this K-shaped economy and why hasn't it gotten better? So, Carol, it's been more than five and a half years since I first started writing about the K-shaped economy.

39:38And I think what's happened is that for those at the top, the financial markets have been extraordinary. Meanwhile, for those at the bottom, things have just continued to deteriorate and now compounded by the cumulative effect of inflation on particularly food. You've referenced the car loan delinquencies, and that's another sign. And, you know, I think that those at the bottom have this heavy weight, whether it's child care, education, housing. It feels it feels mighty heavy to those at the bottom. And I think at this point, we really don't have a single economy in America. We have two very distinct experiences.

40:18Carol Massar:So are we becoming, Peter, an economy, a country where there are a few rich people who are living in a poor country? I would describe it, yeah, as a handful of folks who feel invulnerable in a mounting sea of despair. Hasn't it been like that for years, though? What's different about right now? I mean, I remember having the same discussion, not with the same data, but in graduate school, in a class about how in the developing world, you start to see economies such as this. And that was what the professor was arguing, where we were headed in the U.S. It's been like this for quite some time. The gap has existed, but not to this extreme.

41:01And remember, Tim, there used to be a sense that there was a ladder, a way to progress from the bottom up through the middle class and into the upper middle class and then into the truly wealthy. And for those at the bottom, that ladder is gone. There are no more rungs that enable them to go up. And I think we have fallen into more of a caste system that, to your point, looks less like the America that many were promised and more like a lot of the developed nations around the world.

41:33Carol Massar:So when does it show up, Peter? I feel like we definitely, you know, we just talked with the CFO of Cava, and we definitely saw at Chipotle where they're seeing their business impacted because those who are at the lower economic rung, if you will, when it comes to the U.S. economy are having troubles. And so they're not going to Chipotle or they're not going to Cava and a few other places. But when does this really start to show up in our economy, in the financial markets? Just curious. So in terms of consumer sentiment, it showed up almost immediately after COVID, when those white collar workers were able to pivot to work from home.

42:16Their confidence was restored. They also got boosts from monetary and fiscal policy. And for those at the bottom, those stimulus checks really just went through them to their lenders, to their landlords. And so this has been ongoing for a long time. And I wouldn't underestimate the compounding effect that time has for those at the bottom. And I think it's showing up in the affordability message that you're seeing now politically.

42:44Carol Massar:All right. The other part I want to get to is ask you about is the upper part of the K. Because what we're starting to hear, and our chief economist over at EY Parthenon, he says, the economy remains resilient on the service, but it's increasingly dependent, Peter, on three narrow interconnected A pillars. Affluent consumers, artificial intelligence, field investment, and asset price gains. And the concerns again - That's Gregory Daco, right? Yes, exactly. Thank you. And so the other thing is then, I guess I'm broadening out a little bit because I, you know, very worse than what's going on in those who are just struggling to get food on their table or pay their bills.

43:24Carol Massar:But at the upper ring, and I'm thinking about the broader economy as well, we know the richer consumer is responsible for a bulk of the consumer spending that goes on the economy. And they have felt upbeat because we've seen stock market highs. and that is a result of, in a big way, all of the spending on the AI build-out. It's starting to be questioned, that AI build-out a little bit, and replacement of chips and so on and so forth and those costs and how they are amortized on balance sheets and so on and so forth. But I guess my concern is, when you look at this economy, is it kind of fragile even perhaps potentially for those who are even wealthier in this economy?

44:07I think so. And I think that there's been lots of discussion about the circularity within the AI system. I think that circularity exists more broadly between the wealthy AI. And you see that in first-class travel. You see that in a lot of the luxury experiences. And we used to say that the economy is not the markets. But at the upper end, the markets and the economy are now indistinguishable. And we need to appreciate the fragility of overconfident financial markets. If I look at the amount of speculation going on through options and the price to earnings multiples, there are lots of signs that this is a market that feels extraordinarily confident.

44:55And ironically, that's where the fragility ultimately rests. What about this idea of the meritocracy or the idea that people actually in this day and age have a harder time moving in and out of social strata? The American dream is this idea that anyone can come to the United States and succeed regardless of where they start. You argue that that doesn't exist as much anymore. Why is that? So wealth accumulation happens more slowly. You look at, for example, the fact that it now takes to age 40 to be a first-time homebuyer. It wasn't that long ago when that age was 25. And so the wealth accumulation potential for this new generation is far less than the generation before, assuming that housing is a means for accumulating wealth.

45:50And so what you're seeing is, particularly with things like child care and health care, the burden on those families starting out is substantially higher than the one certainly I experienced and likely the one you started with. All right.

46:08Carol Massar:So how do we fix this? Because it does feel like. You have three minutes, Peter. Fix the problems that ail us. No, I think that policymakers need to be really attuned to this. I think they shouldn't ignore the message of affordability that came out of the New York mayoral election. What we're seeing is not a movement to the left as much as a movement down. And I think policymakers really don't appreciate how purple the bottom of our economy is. And it's increasingly purple with rage. So we need to address their shared vulnerability, their despair, because ultimately history shows that when it becomes widespread, those with nothing to lose will gladly go after those with everything to lose.

47:01Do policymakers actually have the tools in a divided country to fix this? I think they do. I think it requires them to recognize that it is in the best interest of both political parties to address this, because we know that anti-establishment candidates become more popular. We know that progressive candidates become more popular. And so it behooves them to pay attention to this and to address it. And to be clear, those at the bottom are not looking for a handout, they're looking for a hand. They want to see job training. They want to see opportunities that allow them to move up, as we saw from the soybean farmers and the ranchers.

47:45They don't want a government handout. They want their products sold. They want to have a real meaningful purpose in this economy. You know, Peter, I'm thinking of the big

47:55Carol Massar:take that you did with Sarah Holder that's on the Bloomberg right now. And I guess they were asking, She was asking along with Katerina Sariva, talking about this K-shaped economy not just being kind of the same thing as measuring inequality. And I'm just thinking about a response that you gave. And you said it's not just inequality in terms of an economic sense. It's inequality in multiple dimensions at once. Because for those at the bottom, they have scarcity in education, in health care, in child care, in job opportunity. They have what you termed stacked vulnerability, where the economic piece is just one more thing.

48:35Carol Massar:And at the same time, those at the top have an overabundance in everything, power, money, influence. And so it's become very difficult for those at the bottom to ignore what's happening around them. It's also something that has accumulated over years, it feels like, whether they were Republicans or Democrats in the White House or in charge in Congress. So is it going to take time for us to get this fixed? Or do the people like I don't know. You know, I had a Brit say to me, you're a young nation. You're going to have some kind of uprising or revolution. Like, I don't know. How do you I understand policymakers going at this, but it seems like it's a it's a big task.

49:12Yeah, I think those at the top ignore the impatience at the bottom. Time moves very slowly when you lack confidence. And I also think that those at the top are largely blind to the human experience at the bottom. And at the same time, those at the bottom are all too aware of the abundance that exists above them.

49:36Carol Massar:Well said, well said. And I feel like there's a layer of social media here that also makes it a little tricky and certainly really puts it out there. Peter, thank you so much. Peter Atwater, president of Financial Insights, adjunct lecturer of economics at the College of William Mary, joining us from the Bloomberg Washington, D.C. Bureau. He is the subject of the Bloomberg Big Take, which talks all about the K-shaped economy. This is the Bloomberg Business Week Daily Podcast. Available on Apple, Spotify, and anywhere else you get your podcasts. Listen live weekday afternoons from 2 to 5 p.m. Eastern on Bloomberg.com, the iHeartRadio app, TuneIn, and the Bloomberg Business app.

50:19Carol Massar:You can also watch us live every weekday on YouTube and always on the Bloomberg Terminal.

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