Story Stocks®
Updated: 13-Feb-25 13:46 ET
Dutch Bros is perking up nicely following robust Q4 earnings; new CEO had a great first year (BROS)
- Dutch Bros (BROS +27%) is surging to a new 52-week high following its Q4 report last night. After gapping lower following its Q2 report in August, this West-Coast coffee chain has reported back-to-back huge quarters in Q3-Q4. Beyond just the headline numbers, what also stood out was its system same shop comp at +6.9% (+9.5% for company-operated shops), a notable improvement from Q3's +2.7% (+4.0%) and Q2's +4.1% (+5.2%).
- Relative to its competitors, BROS believes it is uniquely positioned and on trend, with an emphasis on iced beverages, personalization, and speed. BROS sees an increasing relevance of the customized energy occasion, which has been core to its menu for over a decade. BROS believes that menu innovation and staying ahead of trends, especially in the competitive beverage industry, is critical.
- In Q4, BROS returned some successful LTO offerings, Candy Cane and Hazelnut Truffle Mocha, and added Jingle Nog and Winter Shimmer Rebel as seasonal offerings. Furthermore, BROS used promotional innovation to surprise customers with giveaways like the passenger princess straw topper and its custom holiday ornament. These were huge hits with customers and these kinds of things strengthen brand loyalty.
- Of note, BROS has increased its advertising budget and it's paying off. BROS has seen considerable improvements to both brand awareness and traffic. Also, its loyalty program, known as Dutch Rewards, is gaining traction with a record 71% of transactions coming from Dutch Rewards members.
- Overall, 2H24 showed a noticeable acceleration in results even as other coffee chains have struggled. We have to tip our cap to the new CEO, she had a great first year at the helm. CEO Christine Barone took over on January 1, 2024. In a bit of irony, she is a former Starbucks (SBUX) executive. Her timing in terms of moving from SBUX to BROS was pitch perfect as the former struggles and the latter succeeds. It is clear that she has been making the right changes to turn Dutch Bros around.
