Friday, 8 November 2024
by BD Banks
Shares of coffee shop chain Dutch Bros (NYSE: BROS) hit a new 52-week high today after the company reported strong third-quarter earnings. The fast-growing craft beverage maker also raised full-year 2024 guidance.
Investors rallied around the report, and shares rocketed higher by nearly 40%. As of 10:52 a.m. ET, the stock held on to a gain of 38.6%. That’s brought year-to-date returns of more than 50% as the stock hits its highest level in more than two years.
Dutch Bros CEO Christine Barone highlighted the company’s focus on its real estate strategy for achieving much of the successful growth it is seeing. Overall revenue in the third quarter soared 28% year over year, with same-store sales growth of 2.7%, exceeding the company’s own estimates.
Barone said the company’s “refined real estate strategy” has led to a boost in productivity from an improved site selection process and a focus on developing new shops. On the conference call for investors, she stated, “Enhanced market planning and our elevated paid ad spending in new markets is driving improved new shop productivity.”
The coffee chain added 38 new shops over the three-month period, most of which are company operated. The company expects 150 total new store openings this year. It also expects to accelerate new shop growth in 2025.
While it now sees higher revenue for the year than previously announced, it still guided to lower capital expenditures for 2024. That type of efficiency is what investors like to see. That doesn’t appear to be by chance, either. Barone noted its use of a growing amount of data to model new store openings.
Shares of the fast-growing company aren’t cheap, though. A forward price-to-earnings (P/E) ratio of about 120 means there is no room for error in its growth strategy. An investing strategy of buying in thirds by adding during dips might make sense after shares soared today, though.
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Howard Smith has no position in any of the stocks mentioned. The Motley Fool recommends Dutch Bros. The Motley Fool has a disclosure policy.