While Dutch Bros (BROS +5.52%) has rallied off its 2025 lows, the stock is still well off its highs for the year, since there continues to be some worry about the state of the consumer economy. However, the drive-thru coffee chain's recent quarterly earnings report showed why a potential slowdown shouldn't scare investors away from the stock.
My prediction is that the company's long-term prospects will outweigh any near-term slowdown in consumer spending.
The long-term story is intact
There have been clear signs that the consumer has been under some pressure, especially in the restaurant space. This could be seen at various points of the income spectrum in the first quarter, with McDonald's and the higher-end Chipotle both seeing their quarterly sales decline as they called out the state of the economy.
However, Dutch Bros was able to overcome weakness among consumers in the first quarter, growing its same-store sales (comps) by 4.7%, with transactions increasing 1.3%. Company-owned stores performed even better, with comps jumping 6.9% with a 3.7% rise in transactions. Comps are one of the most important metrics in the restaurant space because they show how existing locations are performing.
A big part of the reason for Dutch Bros' strong comps growth in a difficult macroenvironment is that it is still in the early days of mobile ordering. The company said this accounted for about 11% of its transactions in its quarter, up from 8% in the fourth quarter.
This is also helping feed into its loyalty program, which made up 72% of system transactions in the quarter. This, in turn, is letting the company introduce new products and send personalized advertising to its rewards members.
And even in this weaker macroenvironment, the company has another big potential initiative that could drive comps: food. Management is currently testing a pilot program to add more food items to its menu at a few select locations. Thus far, the pilot has been a success, and the company is expanding it from eight stores to 32.
It plans to offer eight food items in total, with four hot items. The company believes this will help drive sales and guest frequency in the morning. It expects a broader rollout in 2026.
The strong comps helped lead to a 29.1% surge in revenue to $355.2 million, while the company continues to add new shops. And it is Dutch Bros' expansion opportunity that is one of the biggest reasons to be excited about the stock.
In the quarter, it opened 30 new shops in 11 states, with 25 of the added shops company-owned. It expects to maintain this pace in the second quarter and then accelerate it in the second half of the year. At quarter end, its total shop count was 1,012, of which 695 were company owned.
Overall, it is looking to open at least 160 more shops this year, representing 16% growth. Its goal is to expand its base to 2,029 locations by 2029, and management believes its total addressable market is 7,000 shops.
It said it has a robust long-term real estate development pipeline that, along with strong new-store economics, should support multiple years of new locations in the mid-teens annual percentages.
The company says that the productivity of its new shops continues to improve, which it attributed to its choice of locations and advertising initiatives to drive brand awareness. It said systemwide annual unit volumes (AUV) are now $2 million per store.
Looking at some other important metrics, gross margins in company-owned stores were flat at 21.9%. With tariffs putting pressure on coffee prices, the company has locked in its prices for the rest of the year. It said that with tariffs, this will pressure gross margins by 110 basis points on the year. Gross margins are important because they impact profitability.
Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) climbed 20% year over year to $62.9 million, while adjusted earnings per share (EPS) jumped 56% from $0.09 to $0.14.
Looking ahead, the company maintained its guidance for the full year. It expects around 22% revenue growth for the year, with revenue of between $1.555 billion and $1.575 billion. The forecast for comps growth is in a range of 2% to 4%. Adjusted EBITDA is expected to be between $265 million and $275 million.
Image source: Getty Images
A long-term winner
Even with the consumer feeling pressure, Dutch Bros finds itself in a great spot over the long term. The company should continue to see solid comps growth in the coming years from increased mobile ordering and its introduction of food items, which now represent only 2% of its sales, compared to 19% last quarter for rival Starbucks. As such, food should be a sales driver in the coming years.
Between its menu expansions and that total addressable market of 7,000 shops, this is a stock to own for the long term.
