Dutch Bros Stock Is Down 33% While Its Same-Store Sales Keep Growing. Could the Gap Close on Nov. 4?

Dutch Bros (NYSE: BROS) is one of the hottest, fastest-growing restaurant chains in the U.S. Although it calls itself a coffee shop chain, it's better known for its sugary beverage concoctions, such as its recent "Creepy Crawler" seasonal drink, which includes gummy worms, and its Rebel energy line.

Although it's growing fast, Dutch Bros stock is down 33% year-to-date. Is that likely to change when it reports earnings on Nov. 4?

Launching across the country

Dutch Bros has 1,225 stores as of the end of the third quarter, and it's aiming for at least 185 new openings in 2026. It has a short-term goal of reaching 2,029 stores by 2029 and a long-term goal of getting to 7,000 stores.

Image source: Dutch Bros.

Total sales increased 32% year over year in the second quarter. While much of that was driven by the 48 new store openings in the quarter, the company has also been reporting solid same-store sales growth. It's been positive for the past 13 quarters, and transaction growth has been positive for the past eight quarters, which is important because it means that the growth isn't only coming from higher prices. That implies that more people are coming into stores or coming in more frequently, both of which bode well for the company's future. In the second quarter, same-shop sales increased 5.8% over last year, with transactions up 1.7%.

The market wasn't impressed with that 1.7% number, although company-operated same-shop transactions increased 3.4%. The company originally had a franchise option, but it's only opening company-owned stores at this point. Part of Dutch Bros' success comes from its rigorous standards throughout its portfolio, which it can better manage in its owned stores.

What to expect on Nov. 4

Other reasons Dutch Bros stock is down include its high valuation and worries about its ability to meet its expansion goals. Even at the current P/E ratio of 58, it's not cheap, which is why seemingly small issues can generate a negative market reaction. And in August, it disclosed that it would not be raising its bid on a small chain of salad stores that would have added 65 new stores to its total in one shot.

Given the stock's disappointing performance so far this year, the third-quarter report could be a high-stakes moment. If it beats Wall Street's expectations of 29.4% sales growth and $0.24 in earnings per share (EPS) and has any other promising news, the stock could easily rise, closing the gap between performance and the stock price. If not, the stock could fall further, although some of the negativity is already priced in.

Management raised full-year guidance from about $2 billion in sales and 5% same-store sales growth at the midpoint to $2.1 billion in sales and 5.5% same-store sales growth at the midpoint, but that wasn't enough to keep the stock from dropping. It may play a more significant role in the third-quarter report if everything else goes well.

Over the long term, Dutch Bros has strong potential as it keeps opening new stores and bringing in more customers.

Jennifer Saibil has positions in Dutch Bros. The Motley Fool has positions in and recommends Dutch Bros. The Motley Fool has a disclosure policy.