Yahoo Finance Dutch Bros CEO: 'We're in the early innings of a long-term plan'
Shares of Dutch Bros dropped more than 12% on Wednesday following a miss on Q1 revenue, which came in at $197.27 million.
Despite the miss, revenue jumped 30% higher year-over-year as the company eyes major expansion plans. CEO Joth Ricci told Yahoo Finance the chain is in the "early innings of a long-term plan." In the next 10 to 15 years, he said, the company plans to open 4,000 stores.
Ricci added, "Our path to 4,000 stores is going to have some highs, it's going to have some challenges and we're working through those ... quarter after quarter."
In Q1 2023, the company opened a record 45 new shops, 42 of which were company-operated.
"We knew the first quarter of this year was going to be a challenging lap" year-over-year, Ricci said, but emphasized that the team feels "really good" about the long-term prospects with plans to open 150 total locations this year, 130 of which will be company-operated.
At the end of Q1, which was March 31, 2023, Dutch Bros had 716 total locations, 280 of which opened up in 2022 and 2023.
Dutch Bros will continue to take a "fast approach" to expansion, despite the noise from Wall Street. Shares are down nearly 34% since its IPO back in September of 2021. Prior to the report Tuesday, the company was up 15% year-to-date but pared back those gains with shares falling more than 12% Wednesday.
One area where it is taking an "aggressive approach" to expansion is in Texas with 112 new locations over the course of roughly two years. Ricci said the team is "very pleased" with customer response.
"We decided to go in and kind of execute this fortressing strategy that we have...urban, suburban development and introduce the brand. We know that building this brand, it's a long term play, our shops don't open to maximum potential right away."
In response to new unit volumes being slightly lower, CFO Charley Jemley said in a call with investors, "Annual unit volumes will ebb and flow as we move through our pipeline over time."
One way Dutch Bros is bringing in customers is with value promotions.
"We've got to find trial driving promotions, to get people into shops...buy those extra drinks and showcase some of the things that maybe you didn't know you could have," Ricci told Yahoo Finance.
In March, Dutch Bros ran a 6-hour promotion for military personnel, offering four medium drinks for $15. That promo brought in the largest sales day in company history, with same-store sales 40% higher than a typical Wednesday.
"We got to go in and introduce the brand, introduce why our products are better," Ricci said.
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Brooke DiPalma is a reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.
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