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Dutch Bros (BROS) reported a solid second quarter on Wednesday after the market closed, beating expectations on both the top and bottom lines. The coffee chain also raised its full-year guidance. So why is the stock getting hammered?
Investors seem to be focusing on something else: the company's decision to buy up to 65 locations from a bankrupt salad chain.
Dutch Bros reported second-quarter revenue of $550.9 million, up 32.5% year-over-year. That beat the Street consensus estimate of $525.5 million, according to data from MarketDash.
Earnings came in at 33 cents per share, topping the expected 29 cents per share.
Same-shop sales at company-owned locations rose 8.3% year-over-year, while systemwide same-shop sales grew 5.8%. The company opened 48 new stores during the quarter, 44 of which are company-operated.
This marks the 13th consecutive quarter of positive same-shop sales growth and the eighth straight quarter of same-shop transaction growth.
"We also maintained exceptionally strong development momentum, while AUVs climbed to record levels," CEO Christine Barone said.
Dutch Bros raised its full-year revenue guidance to between $2.1 billion and $2.13 billion, up from the previous range of $2.05 billion to $2.08 billion. The Street was looking for $2.084 billion.
The company also guided for same-shop sales growth of 5% to 6% and adjusted EBITDA of $385 million to $390 million.
"We enter the second half of the year from a position of strength, with a focused plan, strong visibility into our growth initiatives, and a clear path to turning the significant whitespace ahead of us into durable growth," CFO Josh Guenser said.
Dutch Bros expects to open at least 185 new shops in the fiscal year.
Here's the twist: Dutch Bros announced it has acquired the real estate and related site assets of up to 65 Salad and Go locations across Arizona, Nevada, Oklahoma, and Texas. Salad and Go recently filed for bankruptcy and is shutting down all locations.
The deal is expected to close in the third quarter and will give Dutch Bros a portfolio of "established drive-thru locations" that will be converted to Dutch Bros stores in 2027.
"New shop growth is one of the most important drivers of our long-term strategy, and this potential site acquisition demonstrates how we're investing to accelerate that growth," Barone said.
Financial terms were not disclosed.
While the acquisition could be a smart long-term move, investors may be worried about the near-term costs and execution risks. The stock fell 14.47% to $56.17 in after-hours trading, despite the strong quarter and raised guidance. The 52-week trading range is $44.58 to $74.65.
It's a classic case of "good news, but..." The market often punishes companies for unexpected moves, even if they make strategic sense. Only time will tell if this bet on salad shops pays off.
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