High dairy costs and weak sales give Dutch Bros heartburn

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Shares of Dutch Bros plunged more than 30% after hours on Wednesday after the company warned that sales and profits were weakening due to a combination of rising gasoline prices hurting consumer spending and rising dairy prices that were eating away at profit margins.

The Grants Pass, Oregon-based company said its same-store sales fell 3.7% in April and said the key metric would be flat for the full year. The Dutch blamed the problem on rising gasoline prices eating away at consumers’ discretionary income.

“We were not immune to record inflation which exceeded our expectations and put pressure on margins at our company-operated stores,” CEO Joth Ricci said in a statement. “While we believe these margin impacts may be short-term, we have elected to take a more cautious stance on Adjusted EBITDA (earnings before interest, tax, depreciation and amortization) for 2022 as we monitor our prices and cost escalation. environment.”

The company said same-store sales were up 6% in the first quarter and 11% from the same period in 2019. Sales were driven by a combination of higher traffic and checks.

Revenue for the quarter increased 54% to $152.2 million due to a combination of new locations and same-store sales.

Still, total profit from company-operated sites fell 6% to $16.6 million and the company reported a net loss of $16.3 million, higher than the same period. last year, or 10 cents per share. After adjustments for one-time events, the net loss was $2.5 million, or 2 cents per share.

Adjusted EBITDA was halved to $9.7 million due to “the rapid increase in dairy costs well above historical levels which has resulted in an increase in our selling costs”.

Investors’ biggest concern was forecasting. The company said adjusted EBITDA would be “at least $90 million” for the full year. This was well below the $115-120 million Dutch Bros had originally projected for the year.

Dutch Bros stock closed nearly 16% lower on Wednesday. It fell even further after the trading day closed, nearly halving the company’s market capitalization.

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