What happened
Shares of innovative coffee shop chain Dutch Bros. (BROS 1.26%) jumped 15% in March, according to data provided by S&P Global Market Intelligence. The company, which entered the markets with an initial public offering (IPO) in September, impressed investors with a strong expansion plan for the near future.
So what
Dutch Bros. has a unique culture that it builds on to develop customer loyalty. This includes its branding as a fun place to hang out, with friendly service and a party-like atmosphere. Stores have music playing and typically feature an outdoor seating area.
Image source: Dutch Bros.
The company posted excellent fourth-quarter results at the beginning of the month. Revenue increased 56% year over year to $140 million, and comparable, or same-store, sales grew 10%. Net loss increased to $9 million, partially due to the company's initial public offering.
For the full year, revenue increased 52% to $498 million. Net loss increased to $121 million due to the IPO. Adjusted net income, which takes out equity-based compensation, was $48 million, or a slight decrease year over year. It's guiding for $707 million in 2022 fiscal revenue at the midpoint, or a 42% year-over-year increase.
Investors were particularly excited about store opening progress. There were 98 store openings in 2021, which was accelerated from its original plan for 92, and management expects that to increase to 125 in 2022. It also entered three new states: Texas, Oklahoma, and Kansas. CEO Joth Ricci said the new stores are performing at a "very high level." Management sees a long-term market for 4,000 stores, so it's really in its early innings of growth.
Now what
Dutch Bros. stock has gained 57% since its IPO in September, and the Wall Street average consensus is for the price to increase another 12%. That's not much, and a lot of the near-term gains may already be baked into the price.
That said, shares trade at about six times trailing-12-month sales, which isn't a super-high valuation for a growth company. Net loss should contract significantly with the stock-based compensation out of the way, and that will be an important indication of what to expect from the company going forward.
There does seem to be a bright future ahead for this niche coffee chain, and investors should definitely keep it on their watch lists. However, I'm not sure it's a buy after such a big initial post-IPO price run-up.
