Shares of Dutch Bros (BROS 0.08%) have been very volatile since the company's initial public offering in 2021, and they took another dive following its latest quarterly earnings report. In Q1, the coffee purveyor showed strong growth in total revenue, but analysts were disappointed with its decline in same-store sales and weak traffic trends. 

Market participants were quick to draw comparisons to Starbucks' much stronger same-store sales trends recently, suggesting that Dutch Bros is a broken growth story. Several key metrics might be weighing on the stock's performance, but despite them, I'm still holding my shares for the long term. Here's why.

Two quarters of declining same-shop sales

Dutch Bros reported revenue growth of nearly 30% year over year, down from 44% in the fourth quarter of 2022. The deceleration on the top line was brought into sharper focus by the decline of 2% in systemwide same-store sales.  

Management blamed the decline on its fortressing strategy, under which it is opening additional shops in areas where it already has an established presence. It's a strategy that has been used to good effect by Domino's Pizza. The idea is to build brand awareness and beat competitors to the punch.

However, the downside of this strategy is that it can lead to new stores cannibalizing the sales of the older ones -- and that's what happened in this case. Q1 was Dutch Bros' second consecutive quarter of declining same-store sales.  

Dutch Bros is not Starbucks -- on many levels

Dutch Bros often draws comparisons to Starbucks. Both sell coffee, and Starbucks just posted solid growth in same-store sales of 11%, so Dutch Bros must be losing the battle. But at the same time, these are two very different beverage makers.

In addition to caffeinated beverages, Dutch Bros is popular for its unique lineup of flavored cold beverages. On its menu, you'll find drinks named Iced Caramelizer, Banana Cream Pie Freeze, and Mangonada Lemonade. As the company stated in the S-1 Form it filed prior to going public, you would be hard-pressed to find a drink menu with such varied and unique options anywhere else. 

Still, in its early days of growth in the 1990s, Starbucks posted strong top-line growth while also consistently reporting profits on the bottom line. By comparison, Dutch Bros seems to be plowing all its resources into expanding as quickly as possible. The company has been operating at around breakeven over the last few years.

Its trailing-12-month net loss through the first quarter totaled $3.6 million on $784 million of revenue. That's a manageable loss for a fast-growing business. Dutch Bros might not fit everyone's investing goals, but I think the positives far outweigh the negatives.

A customer receiving an order at Dutch Bros.

Image source: Dutch Bros.

A corporate culture for delivering magnificent returns

I own shares of Dutch Bros, and I'm still holding the stock for a few reasons.

First, it has been well-tested through several economic cycles. It has been around since 1992. While Q1 was its third quarter of declining same-store sales in the last two years, management noted that it ended the quarter with momentum in customer traffic, which should put the company back on a growth track in the second quarter. 

Another reason I still like Dutch Bros is its enormous growth potential. I believe its fortressing strategy will work in the end as the shops are fundamentally profitable with a positive cash-on-cash return, as its executives noted on the first-quarter earnings call. The company believes it can open 4,000 shops in the next 15 years, up from the 716 shops across 14 states it was operating at the end of March. 

Finally, Dutch Bros has a winning corporate culture in place. It promotes new store managers from within the company. This will cultivate a deep bench of managerial talent over the long term -- people who are passionate and knowledgeable about the business.

Moreover, Dutch Bros' hiring policy will go a long way to ensure a consistent customer experience as it expands -- an important factor to any restaurant chain's success.

The only reason I would sell is if it started to report negative same-store sales more frequently or started to accrue even greater operating losses for the sake of driving revenue growth. But as of now, Dutch Bros still has the ingredients to be a successful growth investment, so I would look at the recent dip as a buying opportunity.