BROS Q1 2025: Guides 3-4% Q2 comps on record new-shop productivity
- Continued strong momentum: Management highlighted that Q1 momentum is carrying into Q2, with normalized traffic trends (after adjustments like the leap day) underpinning expectations for robust same-store performance.
- Exceptional store productivity: Q&A responses emphasized record new shop openings and strong new shop AUVs, which indicate effective operational execution and a positive market reception for new locations.
- Robust brand value amid macro uncertainty: Executives underscored the strength of their value proposition—bolstered by initiatives such as Dutch Rewards, innovation, and order ahead programs—which helps the brand remain resilient despite broader economic headwinds.
- Margin Pressure from Increased Costs: The company highlighted 110 basis points of net COGS margin pressure due to tariffs and elevated beverage, food, and packaging costs, which could compress profitability if conditions worsen.
- Labor Cost Challenges: Rising labor expenses—reported at 27.4% of company-operated shop revenue—driven by strategic investments, hint at potential margin erosion if sales leverage does not materialize.
- Higher Interest Expense: The increase in interest expense to $7.1 million driven by higher costs on long-term debt and finance leases may indicate added financial pressure that could weigh on earnings if debt servicing costs continue to rise.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | ≈29% increase (from $275.1M in Q1 2024 to $355.152M in Q1 2025) | Total Revenue grew significantly driven by strong performance in company-operated shops and modest but steady growth in franchising revenue; the increase reflects both the legacy momentum from Q1 2024 and continued expansion in 2025. |
Company-operated Shops Revenue | ≈32% increase (from $248.1M in Q1 2024 to $326.421M in Q1 2025) | Revenue from company-operated shops surged due to contributions from newly opened shops and improved same shop sales, with new shop revenues adding approximately $62.1M and same shop sales contributing an additional boost; these factors amplified the performance seen in the prior period. |
Franchising and Other Revenue | 6.4% increase (from $27.0M in Q1 2024 to $28.731M in Q1 2025) | Moderate growth in this segment continues the trend observed in FY 2024, driven by new franchised shop openings and increased product sales to franchisees, maintaining momentum from previous periods. |
Operating Income | 97% increase (from $15.778M in Q4 2024 to $31.072M in Q1 2025) | Operating income nearly doubled thanks to significant revenue gains combined with improved cost management and operational efficiencies; the marked margin improvement over Q4 2024 indicates both strengthened revenue base and a more favorable cost structure. |
Net Income Attributable to BROS |
| Net income soared dramatically as a result of strong revenue growth, reduced taxes (tax expense dropped from much higher figures to $1,459K in Q1 2025), and lower costs relative to revenue; this stark improvement builds on the earlier, weaker performance observed in Q4 2024. |
Selling, General & Administrative Expenses | 18% decline (from $72.170M in Q4 2024 to $58.921M in Q1 2025) | SG&A expenses decreased notably, helped by lower cost items such as reduced restructuring charges and nonrecurring equity offering expenses, even as the company maintained investments in human capital and technology; this reduction improved overall profitability compared to the previous quarter. |
Liquidity | Increase to $316.441M in Q1 2025 (up from $293.4M at FY 2024-end) | Liquidity remained robust with cash and cash equivalents rising to $316.441M, driven by strong operating cash flow generation and disciplined working capital management that built on the liquidity improvements seen at the end of FY 2024. |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Revenue YoY Growth | Q1 2025 | 21% to 23% YoY growth for FY 2025 | 29% YoY, from $275.099MIn Q1 2024 to $355.152MIn Q1 2025 | Beat |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
New Shop Productivity & Expansion | Q2 2024 discussions emphasized higher AUVs, a recalibrated real estate model, and expansion with 36 new shops ( ). Q3 2024 highlighted robust shop openings (38 new shops) and a strengthened development pipeline ( ). Q4 2024 reinforced strong new shop productivity with 32 new openings and strategic site planning ( ). | Q1 2025 showcased record-breaking new shop productivity with some of the top openings ever, 30 new shops opened, and a long‐term plan to reach 2029 shops by 2029 supported by strong real estate and paid media investments ( ). | Consistent growth with strengthened sentiment. The narrative has evolved from cautious expansion and iterative improvements to record performance, reflecting increasing confidence and a robust pipeline for future growth. |
Mobile Order Adoption & Digital Integration | Q2 2024 introduced the early stage rollout in about 40 shops with an emphasis on operational ease ( ). Q3 2024 saw strong integration with 90% system coverage, increased mobile order transactions, and alignment with rewards enhancing customer frequency ( ). Q4 2024 detailed near-universal shop capability (96%-99%), with mobile orders accounting for 8% of transactions and boosting morning dayparts ( ). | Q1 2025 reported further improvement with mobile orders rising to approximately 11% of the transaction mix, increased morning traffic, and enhanced integration with the Dutch Rewards program driving personalization and engagement ( ). | Steady, positive momentum. The topic remains consistently important and shows incremental gains in adoption and integration, with metrics and customer engagement steadily improving over time. |
Brand Strength & Rewards Program Engagement | Q2 2024 highlighted strong brand loyalty with notable customer drive (Florida rollout) and innovation in product offerings ( ). Q3 2024 emphasized record mobile order–driven rewards registrations and a high-traffic, highest-transaction quarter ( ). Q4 2024 reinforced brand strength with impressive same-store sales growth and 71% of transactions via the Rewards program, reflecting robust engagement ( ). | Q1 2025 maintained the strong brand narrative with 72% of system transactions coming through the Dutch Rewards program and continued emphasis on customer loyalty, enthusiasm, and a clear future vision from leadership ( ). | Consistently robust with incremental improvements. The strong brand identity and rewards engagement remain central to the strategy, with slight improvements in rewards penetration and consistent customer loyalty underscoring future impact. |
Cost Pressures & Margin Erosion | Q3 2024 discussed increased labor and occupancy costs with some pricing improvements partially offsetting these pressures ( ). Q4 2024 did not mention cost pressures, and Q2 2024 had no coverage. | Q1 2025 emphasized elevated costs for beverages, food, and packaging, with specific concerns regarding rising coffee prices expected to exert further margin pressure in upcoming quarters ( ). | Growing concern. While cost pressures were noted previously (notably in Q3 2024), Q1 2025 places greater focus on these issues, indicating an increasing challenge that could impact margins if not effectively managed. |
Discounting & Promotional Activity Impacts | Q2 2024 outlined plans to boost promotional activity to offset price growth, while Q3 2024 highlighted a 2-point discount drag and Q4 2024 noted a pullback on discounting that contributed over 1 percentage point to same-store growth ( ). | Q1 2025 reported no significant change in discounting levels compared to the previous year while emphasizing increased sophistication in offer execution, leading to greater efficacy without additional spending ( ). | Transition to strategic precision. The approach has shifted from reactive promotional measures to more tactical and refined discounting, maintaining consistency in spending while enhancing the effectiveness of promotions. |
Innovation & Operational Initiatives | Q2 2024 showcased new product launches such as Boba, Protein Belk, and additional drink innovations while advancing mobile order capabilities across many shops ( ). Q3 2024 demonstrated a strong innovation pipeline with new product introductions (e.g., Cookie Butter Latte) and operational enhancements including mobile order rollout and food testing ( ). Q4 2024 reinforced innovation via merchandise drops, robust paid advertising, and further mobile ordering advancements ( ). | Q1 2025 introduced creative initiatives like the rubber duck promotion, further order ahead enhancements, and an expanded food pilot increasing from 8 to 32 shops, all while focusing on throughput optimization and leveraging the Dutch Rewards program ( ). | Consistent focus with new creative expansions. The company continues to prioritize innovation and operational initiatives, now adding novel promotions and significantly expanding food testing—a potential game changer for future service offerings. |
Emerging Food Test Expansion Risk | Q3 2024 introduced the early-stage food test in six shops with cautious exploration of expanded menus and clear attention to execution and team support ( ). Q4 2024 provided modest updates with the test in eight shops and details on supply chain and operational refinements, without disclosing extensive numbers ( ). | Q1 2025 revealed a significant expansion of the food test pilot to 32 shops as part of a deliberate strategy to refine protocols ahead of a broader rollout in 2026, indicating commitment to this new revenue stream while carefully managing associated risks ( ). | Evolution from pilot to broader rollout. The initiative has moved from a cautious test phase to a more committed expansion, signaling growing confidence in the opportunity while still acknowledging execution risk, which could have a large future impact if successful. |
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Guidance & Momentum
Q: How does Q1 momentum impact Q2 comps?
A: Management stated that strong Q1 momentum supports 3–4% comps in Q2, with normalized traffic post-leap day adjustment reinforcing the outlook. -
Coffee Pricing
Q: Was coffee priced near $4?
A: They locked in prices just below $4, which allowed them to absorb tariff pressures and confirm about 110 basis points margin pressure on coffee costs. -
Food Opportunity
Q: How does the food pilot impact margins?
A: The limited-SKU food test is designed to drive incremental beverage sales despite lower food margins, ultimately enhancing overall profitability. -
Mobile Order Increment
Q: What benefit does mobile ordering add?
A: Mobile orders boost frequency and particularly strengthen the morning traffic, though they carry a slightly lower check size. -
Labor Cost Offsets
Q: Will leadership investments offset rising labor costs?
A: Strategic investments in shop leadership are expected to counteract rising labor expenses through improved sales leverage. -
Texas Shops Impact
Q: How will new Texas shops affect comps?
A: The addition of newer Texas shops is projected to enhance comps, mirroring the strong performance seen in other new market vintages. -
New Shop Productivity
Q: Can high new shop productivity be sustained?
A: Q1 showed record new shop openings with stellar productivity, suggesting that this strong performance will continue. -
Food & Beverage Costs
Q: Were cost trends better than expected?
A: Cost performance was in line with expectations, with favorable pricing and controlled expenses offsetting anticipated pressures. -
Consumer Trial Activation
Q: What drives consumer trial in new markets?
A: Robust paid advertising combined with rapid mobile adoption and local engagement is effectively driving consumer trial. -
CPG Channel Vision
Q: What is the vision for the CPG channel?
A: The CPG channel is viewed as a longer-term, license-based opportunity aimed at expanding brand awareness and reach. -
Mobile Order Check & Demographics
Q: Does mobile order impact check size or demographics?
A: Mobile orders tend to show a slightly lower check size due to morning routines, with no significant demographic shift noted. -
Operational Throughput
Q: How are throughput improvements being achieved?
A: Improved productivity comes from deploying speed dashboards and flexible team tactics to address peak-hour demands. -
Mobile vs Walk-Up Mix
Q: How do mobile orders compare to walk-up sales?
A: While mobile orders are incrementally beneficial, especially in the morning, the precise mix with walk-up sales is not separately quantified. -
Promotions Discount Use
Q: Have promotion discount strategies changed?
A: There has been no notable increase in discount intensity, though improved targeting has enhanced their effectiveness. -
Store Layout Evolution
Q: Will store design evolve with new initiatives?
A: Although the overall gross box remains similar, operational zones are being tailored to support varied product mixes. -
Leap Day Adjustment
Q: Was there a leap day traffic adjustment?
A: Yes, management adjusted the traffic figures for the leap day to provide a normalized view of store performance.
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