Dutch Bros (NYSE: BROS) saw a roughly 20% decline in shares after reporting second-quarter profits, disappointing investors with lower-than-expected forecasts. The stock entered negative territory for the year as a result of the decrease.Â
Not enough raised direction Revenue reached $324.9 million in the second quarter, up 30% year over year and more than $7 million over the analyst consensus. Achieved profits per share (EPS) increased by 46% to $0.19, exceeding experts’ estimates as well.
The company’s performance surpassed expectations for two of the major figures that investors look at when earnings season rolls around. While company-operated same-store sales increased 5.2%, same-store sales increased 4.1%.
Growth Story
Dutch Bros is primarily a growth story; during the quarter, the company opened 36 additional coffee shops, 30 of which were owned by the company. By the conclusion of Q2, it had 912 sites.
Adjusted earnings before interest, taxes, depreciation, and amortization, or EBITDA, increased to $65.2 million in FY18, a 34% increase over FY 2015.
From a previous estimate of $1.200 billion to $1.215 billion, the company increased its full-year sales projection to between $1.215 billion and $1.230 billion. It anticipates a low-single-digit increase in same-store sales.
Additionally, it increased its EBITDA projection from the previous range of $195 million to $205 million to $200 million to $210 million.
The management did, however, issue a warning, stating that the number of new stores launching this year will be between 150 and 165. In order to ensure that it is developing locations with the highest average unit volume (AUV) potential, Dutch Bros is recalibrating its real estate business and shifting its pipeline back toward more capital-efficient leasing arrangements. As a result, new stores ought to have lower capital costs per shop and greater AUVs.
Should you purchase the dip now?
The stock’s decline appears to be mostly caused by a mix of lower store openings this year and slower same-store sales in the second half as the company absorbs a significant price rise.Given that same-store sales increased by 10.0% in Q1 and 4.1% in Q2, the company’s low single-digit growth estimate for the year suggests that growth will slow down for the remainder of 2024.
Investors hope that this growth story’s segments don’t slow down. Even though it may result in a little slowdown, it is wise to optimize its shop opening approach because expanding for the sake of expansion is bad.
With little over 900 sites, Dutch Bros stores are typically on the smaller side, but there is still room for growth in the long run for the business. The implementation of mobile orders, which is still in its early stages, should be a good growth driver.
A company like Dutch Bros has a long runway of new store growth ahead of it, making it challenging to value. In the next ten to fifteen years, the management intends to open over 4,000 stores, however as of this writing, the stock is only trading at 2.2 times sales. In contrast, rival Starbucks, a considerably more established company dealing with diminishing comparisons, is still trading at 2.5 times revenues.
