- Dutch Bros (NYSE:BROS) stock is down more than 30% this morning on a lowered 2022 forecast
- The coffee company now expects $90 million in adjust annual earnings, compared t0 $118 million previously
- Company leadership cited inflation as the main driver behind the slashed outlook
Oregon-based coffee chain Dutch Bros (NYSE:BROS) is down nearly 35% at the time of writing after lowering its 2022 outlook. While BROS stock has been somewhat resistant to the bearish wave hitting the markets lately, today’s selloff may mark an end to Dutch Bros’ good fortune.
The company’s descent began after hours on Wednesday, following its fiscal first-quarter earnings report. BROS announced an earnings loss of 2 cents per share, worse than the expected loss of 1 cent. Additionally, Dutch Bros leadership lowered its expected adjusted 2022 earnings to “at least $90 million.” The company had previously forecasted between $115 and $120 million in adjusted earnings. It did, however, maintain its revenue expectations for 2022 between $700 million and $715 million.
This is likely fueling Dutch Bros’ plunge today as the latest victim of a brutal earnings season.
BROS Stock Approaches All-Time Low on Impacted Margins
Dutch Bros leadership repeatedly emphasized the pressure that rising prices have put on its already fine margins. Dairy, in particular, has had a surprisingly pronounced effect on the company’s bottom line. Joth Ricci, chief executive of Dutch Bros, commented on the outlook:
“We anticipated higher expenditures. However, we did not perceive the speed and magnitude of cost escalation within the quarter. Dairy, for example, which makes up 28% of our commodity basket, rose almost 25% in Q1. While costs rose throughout the quarter, we experienced a change in sales trajectory from mid-March onward as macroeconomic headwinds accelerated and comps turned negative.”
The company did take action to counter its rising costs, hiking prices for a number of its food and beverage offerings. However, according to Ricci, the price increases were “less than half as much as many of our peers.”
While the company expects its impacted margins may only be a short-term concern, the company still felt it necessary to reflect the change in its 2022 guidance. That was clearly more than enough to trigger a selloff for its already pessimistic investor base.
BROS is trading around $22 per share at the time of writing, less than half its $48 price point from the start of May. It has even fallen below its initial public offering (IPO) price of $23 from September in pursuit of a new all-time low.
On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.