Shares of coffee shop chain Dutch Brothers (NYSE: BROS) hit a new 52-week high today after the company reported strong third-quarter earnings. The fast-growing craft drinks company has also raised expectations for the full year 2024.
Investors rallied behind the report and shares rose nearly 40%. As of 10:52 a.m. ET, shares maintained a 38.6% gain. That has delivered a year-to-date return of more than 50% as the stock hits its highest level in more than two years.
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Dutch Bros CEO Christine Barone highlighted the company’s focus on its real estate strategy to deliver much of the successful growth it is seeing. Total third-quarter sales rose 28% year-over-year, with same-store sales growth of 2.7%, which exceeded the company’s own estimates.
Barone said the company’s “refined real estate strategy” has led to an increase in productivity thanks to an improved site selection process and a focus on new store development. During the investor conference call, she said: “Improved market planning and our increased paid advertising spend in new markets is driving improved new store productivity.”
The coffee chain has added 38 new stores in the past three months, most of which are corporate-operated. The company expects a total of 150 new store openings this year. It also expects new store growth to accelerate by 2025.
While higher revenues for the year are now expected than previously announced, the company remains committed to lower capital expenditures through 2024. That kind of efficiency is what investors want to see. That doesn’t seem to be a coincidence either. Barone noted that it is using a growing amount of data to model new store openings.
However, the fast-growing company’s shares aren’t cheap. A forward price-to-earnings (P/E) ratio of around 120 means there is no room for error in the growth strategy. An investment strategy of buying third countries by adding stocks during dips could make sense after stocks soared today.
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