Chocolate pricing

The results of Dutch Bros. led to a 25% increase in dairy product prices in the first quarter

Dutch Bros Inc.’s stock plunged nearly 34% in premarket trading on Thursday after price inflation, particularly a spike in dairy costs, led to a downgrade in the outlook for the company. coffee chain for the whole year.

“We had anticipated higher expenses. However, we did not see the speed and magnitude of cost escalation in the quarter,” Dutch Bros. chief executive Joth Ricci said on the call, according to FactSet.

“Dairy, for example, which makes up 28% of our staple basket, was up almost 25% in the first quarter. As costs rose throughout the quarter, we experienced a shift in sales trajectory from mid-March as macroeconomic headwinds accelerated and prices turned negative.

Among these headwinds was rising gasoline prices.

To see: Starbucks Adds Chocolate Cream Cold Brew to Summer Menu

And: Starbucks plans to invest about $200 million to meet increased demand for personalized cold drink orders

Dutch Brothers BROS,
-35.23%,
like so many other companies, raised prices to manage inflation, but Ricci says the increases were “less than half that of many of our peers”.

The company reported a bigger-than-expected loss for the quarter on Wednesday evening, although revenue beat expectations. Same store sales increased 6%.

It now expects “at least $90 million” in adjusted earnings before interest, tax, depreciation and amortization (Ebitda) for the year, down from a target range of $115 million to $120 million. dollars before. And for the second quarter, the company expects same-store sales flat to slightly negative. The FactSet consensus is for a 1.1% increase.

Despite the results, JPMorgan said “buy the reset”.

“Dutch Bros completed its IPO on September 14, 2021 at a price of $23 per share. About 60% of trading days since then, stocks have traded above $50,” the analysts say.

“The ~16% drop in shares on the day the results were released after market, and the ~37% drop in after-hours trading is a major valuation reset for the company.”

JPMorgan notes the overweight in shares of Dutch Bros. and cut his price target to $36 from $58.

The shares of Dutch Bros. lost 32.5% for the year to date through Wednesday, while the S&P 500 SPX index,
-0.20%
fell by 17.4%.