Despite a challenging year for consumer spending, Dutch Bros remains on track with its growth strategy. Sales grew 28% year over year last quarter, with same-store sales up 2.7%. This indicates an offering that resonates with people and drives repeat purchases, similar to that of other leading beverage chains Starbucks.
Dutch Bros has consistently achieved sales growth of approximately 30% or better in recent years. The only reason why the stock is not following that growth is profitability. But here too, Dutch Bros is performing well for a small restaurant company. Net income rose 62% year over year, reaching $22 million in the third quarter.
Dutch Bros has enormous opportunities to continue expanding. The company operated just 950 stores in 18 states in its most recent quarter. The stock rebounded sharply after the company’s third-quarter earnings results, but it’s not too late to get in on the action. The company’s long growth curve can still deliver excellent returns in the long term.
It is the dominant e-commerce platform in Latin America, serving an area of ​​more than 500 million people Amazon serves the U.S. People rely on it for many of their purchases in increasing numbers and with increasing involvement. For example, the number of customers who shopped in three or more categories increased 468% between 2019 and 2023, and the average number of products per quarter per buyer increased from 4.4 to 7.1.
The company has high next-day and two-day shipping rates, and as more suppliers join its logistics network, it benefits from a flywheel effect where more customers join, more suppliers join, and higher sales occur. That creates incredible profitability at scale. Latin America is still under-penetrated in e-commerce. Therefore, MercadoLibre is growing at a fast pace and also has a long growth trajectory.
In addition to its e-commerce activities performing well, MercadoLibre also has a fintech business that is growing even faster. What started as a means for underbanked customers to pay for their purchases has grown into a full-fledged financial services app that includes credit cards, digital payments, investing tools and more. It has developed a strong lending business, underlined by its rich data store, resulting in effective risk management and low costs. It is the top fintech platform in three of the top four regions in terms of monthly active users, which continue to rise. As it adds customers to its ecosystem, it benefits from the lower churn, higher engagement, and lower credit risk that systematic users create.
The company continues to improve its operations and develop new segments and services, such as a growing advertising business and an e-commerce membership program, both like Amazon.
As impressive as it already is, MercadoLibre offers tremendous long-term opportunity. It is likely that it will continue to crush the market for the next five years and more.
Jeremy Bowman (Sweet Green): Not every restaurant stock is next Chipotle Mexican Grillbut Sweetgreen is one of the most intriguing restaurant stocks to hit the market in recent years.
The company is the nation’s largest fast-casual salad chain and offers a unique take on the fast-casual model that has been so successful for peers like Chipotle. Sweetgreen generates average unit volumes of $2.9 million, which is among the top in the industry and a clear sign that the product is popular.
In the second quarter, same-store sales rose 9%, showing momentum for the company, and there is plenty of room for growth with just over 225 locations currently.
However, the biggest reason why the stock has the potential to crush the S&P 500 by 2030 is its embrace of technology, especially Infinite Kitchen, the robotic assembly line system that both speeds up throughput and increases the company’s average ticket and margins.
The company is rolling out the technology to more restaurants, and it could be a game changer in the long run as the company expands across the country with plans to reach 1,000 restaurants by the end of the decade.
With the company’s high average unit volumes, Infinite Kitchen could also contribute to higher operating income, as the company is still not profitable under generally accepted accounting principles (GAAP). However, profitability is improving and if it can expand its margins to approach those of more established fast-casual chains, Sweetgreen’s shares should rise for the rest of the decade.
Consider the following before purchasing shares in Dutch Bros:
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jennifer Saibil holds positions in MercadoLibre. Jeremy Bowman has positions in Amazon, Chipotle Mexican Grill, MercadoLibre and Starbucks. John Ballard has positions in Dutch Bros and MercadoLibre. The Motley Fool holds positions in and recommends Amazon, Chipotle Mexican Grill, MercadoLibre, and Starbucks. The Motley Fool recommends Dutch Bros and Sweetgreen and recommends the following options: Short December 2024 puts $54 on Chipotle Mexican Grill. The Motley Fool has a disclosure policy.
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