Dutch Bros Shows Resilience with Strong Sales Amid Consumer Concerns
While Dutch Bros (NYSE: BROS) has seen a recovery from its 2025 lows, the stock remains below its highs for the year due to ongoing worries about the consumer economy. Nevertheless, the drive-thru coffee chain’s recent quarterly earnings report indicates that potential slowdowns shouldn’t deter investors.
In my view, the company’s long-term prospects will outweigh short-term dips in consumer spending.
Long-Term Growth Remains Unhindered
Recent indicators reveal that consumer spending has been under pressure, particularly in the restaurant sector. Major chains, including McDonald’s and Chipotle, reported declines in sales during the first quarter, highlighting economic challenges.
In contrast, Dutch Bros delivered strong results, with same-store sales growing by 4.7% and transactions increasing by 1.3%. The company-owned stores fared even better, showing a 6.9% increase in comps and a 3.7% rise in transactions. Same-store sales are crucial in the restaurant industry as they reflect the performance of existing locations.
A significant factor contributing to Dutch Bros’ strong sales growth is its early-stage mobile ordering initiative. The company noted that mobile orders accounted for about 11% of transactions in the quarter, up from 8% in the previous quarter.
This initiative has also positively impacted the company’s loyalty program, which represented 72% of system transactions. The program allows Dutch Bros to introduce new products and send personalized advertising to its loyalty members.
Menu Expansion and Development Plans
Even in a challenging macroeconomic environment, Dutch Bros is exploring another growth area: food offerings. Management is currently testing a pilot program that introduces additional food items at select locations. The pilot has been successful thus far, prompting an expansion from eight stores to 32.
The company plans to offer a total of eight food items, including four hot items, which it believes will enhance morning sales and customer frequency. A broader rollout is anticipated in 2026.
The impressive same-store sales were a driving force behind a 29.1% revenue increase to $355.2 million. Critical to the stock’s appeal is Dutch Bros’ expansion strategy. In the last quarter, it opened 30 new shops across 11 states, including 25 company-owned locations. The company expects to maintain this opening pace throughout the second quarter and accelerate in the latter half of the year. By the end of the quarter, the total shop count reached 1,012, 695 of which are company-owned.
For the year, Dutch Bros is aiming to open at least 160 more shops, signaling a 16% growth rate. Ultimately, the goal is to expand to 2,029 locations by 2029, with the management estimating a total addressable market of 7,000 shops.
Strong Financial Metrics
The company boasts a robust development pipeline, along with positive economics for new stores. This positions Dutch Bros for sustained growth over multiple years at mid-teen percentages annually. Productivity at new shops is improving, attributed to strategic location choices and effective advertising efforts to boost brand awareness. Systemwide annual unit volumes (AUV) currently stand at $2 million per store.
Regarding financials, gross margins for company-owned stores remained steady at 21.9%. The company has proactively locked in coffee prices for the rest of the year, but tariffs are expected to diminish gross margins by 110 basis points. These margins are critical as they impact overall profitability.
Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) saw a 20% year-over-year increase, reaching $62.9 million, while adjusted earnings per share (EPS) surged 56% from $0.09 to $0.14.
Looking forward, the company maintains its guidance for the year, anticipating around 22% revenue growth with estimates between $1.555 billion and $1.575 billion. Comps growth is projected between 2% and 4%, while adjusted EBITDA is expected to fall within the range of $265 million to $275 million.
Image source: Getty Images
Strong Position for the Future
Despite pressures affecting consumer spending, Dutch Bros is well-positioned for long-term growth. The company is set to maintain solid sales increases in the years ahead, driven by its mobile ordering capabilities and the introduction of food items, which currently account for only 2% of its sales—far below Starbucks, which reached 19% last quarter. This disparity suggests considerable potential for food items to contribute to revenue growth.
With menu expansions and its considerable addressable market of 7,000 shops, Dutch Bros presents a compelling long-term investment opportunity.
Is Dutch Bros a Smart Investment Right Now?
Before considering an investment in Dutch Bros, it’s essential to evaluate various factors:
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Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chipotle Mexican Grill and Starbucks. The Motley Fool recommends Dutch Bros and offers derivatives on Chipotle Mexican Grill. The Motley Fool adheres to a strict disclosure policy.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
