Dutch Bros, trading under the ticker BROS and recently noted with a slight slip of 1.52%, is a coffee shop chain that’s rapidly expanding with bold goals. Originally a regional brand, it now boasts operations in 18 states, gaining popularity across new areas with promising prospects. Even though its stock performance has fluctuated, it has surged 68% in 2024, significantly outpacing the market. This begs the question: where will Dutch Bros be in the next five years?
### A Look Back: The Past Five Years
Going public in 2021 doesn’t tell the whole story of Dutch Bros, which has been serving coffee lovers since it started as a pushcart business in Oregon back in 1992. Over the years, as the company expanded into multiple storefronts, it held onto its foundational ethos of fostering good times with upbeat music. This culture has been seamlessly integrated into their branding, creating a welcoming and laid-back atmosphere in each location.
At the time of its initial public offering, Dutch Bros operated 503 stores, primarily located along the West Coast. Fast forward to the close of the third quarter in 2024, and that number has nearly doubled to 950 stores. With around 150 new store openings in 2024 alone, the company is ambitiously aiming to reach a total of 4,000 stores within the next decade or so, indicating an acceleration in their expansion strategy.
Since the IPO, revenue growth has been consistently impressive, with a 28% year-over-year increase reported in the third quarter. However, the story varies slightly with same-shop sales growth, impacted by various hurdles in a challenging market landscape.
Dutch Bros responded to inflation pressures by adjusting its prices, allowing them to cope with increasing costs while navigating a decline in consumer spending. Although same-store sales have fluctuated, they reported a 2.7% growth in the third quarter, marking their strongest transaction growth in two years—showing that sales gains aren’t solely due to price hikes.
Profitability has been a recent achievement for Dutch Bros, evolving from occasional profits to consistent ones. After clocking its first annual profit in 2023, the company is on track to do so again in 2024, having posted a net income of $21.7 million in the third quarter, up significantly from $13.4 million in 2023.
### Peering Ahead: The Next Five Years
Earlier this year, management hinted that their store opening numbers for 2024 might hit the lower end of projections, causing some investor jitters. Adjustments to the company’s real estate strategy meant certain sites no longer met their modified criteria. While this could be seen as a setback, it might actually benefit shareholders long-term if Dutch Bros become more strategic and efficient in its expansion. As of now, details for 2025 remain sparse, but assuming the new strategies align with expectations smoothly, there should be plans for broader growth, especially if the company remains committed to its extensive store goals.
As it plants its flag in new territories, growing revenue should come as a natural progression for Dutch Bros. Of greater significance will be their same-store sales growth. Given the company’s robust performance even under challenging economic conditions, maintaining or even improving these figures should become easier.
A key development is their rollout of mobile ordering across their store network, which promises to bolster both top-line and bottom-line performance. Newer store designs are equipped to handle a variety of ordering methods, including in-store, mobile, and even walk-up windows, broadening customer engagement.
All these developments are anticipated to lead to a stronger bottom line. Wall Street is projecting earnings per share of $0.45 in 2024, up from $0.30 the previous year, with expectations rising to $0.55 in 2025.
Overall, Dutch Bros is not just expanding; it is refining its approach, suggesting that by five years’ time, the coffee chain will be even larger and more efficient, rewarding today’s investors with potential market-topping growth.
