High dairy costs and low sales give Dutch Bros heartburn

The drive-thru beverage chain’s stock price plunged 37% Wednesday after the company said sales declined in April due to rising gas prices and profits thinned because of higher dairy costs.
dutch bros
Photograph: Shutterstock

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

The Grants Pass, Ore.-based company said its same-store sales were down 3.7% in April and said the key metric would be flat for the full year. Dutch blamed the problem on higher gas prices eating into consumer discretionary income.

“We were not immune to the record inflation that surpassed our expectations and pressured margins in our company-operated shops,” CEO Joth Ricci said in a statement. ‘While we believe these margin impacts may be short-term, we have opted to take a more conservative stance regarding adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) for 2022 as we monitor our pricing and the escalating cost environment.”

The company said that same-store sales rose 6% in the first quarter and 11% when compared with the same period in 2019. Sales were driven by a combination of higher traffic and check.

Revenues in the quarter rose 54% to $152.2 million on a combination of new locations and same-store sales.

Yet total profit at company-operated locations declined 6% to $16.6 million and the company reported a net loss of $16.3 million, wider than in 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 cut in half to $9.7 million due to “rapid escalations of dairy costs well above historic levels drove increases in our cost of sales.”

Investors’ bigger concern was the forecast. The company said adjusted EBITDA would be “at least $90 million” for the full year. That was far lower than the $115 million to $120 million Dutch Bros had initially forecasted for the year.

Dutch Bros’ stock closed down nearly 16% on Wednesday. It fell even more after the trading day closed, cutting the company’s market cap nearly in half.

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