We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Dutch Bros Tightens Cost Controls: Are Margin Gains Sustainable?
Read MoreHide Full Article
Key Takeaways
Dutch Bros' Q2 adjusted EBITDA rose 37% to $89M, outpacing 28% revenue growth.
Lower dairy costs and leaner staffing drove a 30-bps rise in Q2 shop contribution margins.
BROS sees Q3 margins easing to 28.5% as input inflation and expansion costs return.
Dutch Bros Inc. (BROS - Free Report) is placing increasing emphasis on profitability discipline as operating efficiency becomes a defining feature of its next growth phase. In the second quarter of 2025, the company reported adjusted EBITDA of $89 million, representing a 37% year-over-year increase and a meaningful outperformance relative to 28% revenue growth. Management credited the improvement to lower input costs and better labor leverage across its rapidly expanding shop base.
During the second quarter, company-operated shop contribution margins reached 31.1%, up 30 basis points (bps) from the prior year, supported by dairy cost relief and a 60-basis-point reduction in labor expenses as a percentage of revenues. BROS’ improved scheduling model and throughput dashboards helped optimize staffing levels, while build-to-suit lease models reduced capital requirements. Beverage, food and packaging costs fell 20 bps year over year to 25.3%.
While second-quarter results benefited from favorable commodity trends, management signaled that the cost environment could normalize in the back half of 2025. Dutch Bros expects beverage and food costs to rise toward 26% of revenues as coffee tariffs and input inflation offset dairy tailwinds. The company also anticipates higher preopening expenses tied to its 160-shop expansion plan, which could temporarily pressure margins.
Looking ahead, Dutch Bros guided to third-quarter shop contribution margins of roughly 28.5%, implying modest sequential compression as commodity benefits wane. Still, management pointed to its improving capital structure — including a 15% sequential decline in average CapEx per shop and a recently refinanced $650 million credit facility — as enablers of more sustainable profitability.
Despite near-term input cost headwinds, Dutch Bros framed its margin trajectory as structurally improving. The company’s focus on labor efficiency, supply-chain optimization and capital-light development suggests a business model increasingly geared toward consistent, high-return growth. While rising coffee costs may temper near-term gains, Dutch Bros’ cost discipline signals the foundation of a more durable margin framework in the years ahead.
Shares of Dutch Bros have declined 6.7% so far this year compared with the industry’s fall of 10.8%. In the same time frame, other industry players like Starbucks Corporation (SBUX - Free Report) , Sweetgreen, Inc. (SG - Free Report) and Chipotle Mexican Grill, Inc. (CMG - Free Report) have declined 14%, 76.5% and 34%, respectively.
BROS YTD Price Performance
Image Source: Zacks Investment Research
From a valuation standpoint, BROS trades at a forward price-to-sales (P/S) multiple of 4.24, above the industry’s average of 3.35. Conversely, industry players, such as Starbucks, Sweetgreen and Chipotle, have P/S multiples of 2.28, 1.09 and 4.01, respectively.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for BROS’ 2025 earnings per share has remained unchanged at 68 cents in the past 60 days.
Image Source: Zacks Investment Research
The company is likely to report strong earnings, with projections indicating a 38.8% rise in 2025. Conversely, industry players like Sweetgreen and Chipotle are likely to witness an increase of 10.1% and 7.1%, year over year, respectively, in 2025 earnings. Meanwhile, Starbucks' 2025 earnings are likely to witness a fall of 34.4%, year over year.
Image: Bigstock
Dutch Bros Tightens Cost Controls: Are Margin Gains Sustainable?
Key Takeaways
Dutch Bros Inc. (BROS - Free Report) is placing increasing emphasis on profitability discipline as operating efficiency becomes a defining feature of its next growth phase. In the second quarter of 2025, the company reported adjusted EBITDA of $89 million, representing a 37% year-over-year increase and a meaningful outperformance relative to 28% revenue growth. Management credited the improvement to lower input costs and better labor leverage across its rapidly expanding shop base.
During the second quarter, company-operated shop contribution margins reached 31.1%, up 30 basis points (bps) from the prior year, supported by dairy cost relief and a 60-basis-point reduction in labor expenses as a percentage of revenues. BROS’ improved scheduling model and throughput dashboards helped optimize staffing levels, while build-to-suit lease models reduced capital requirements. Beverage, food and packaging costs fell 20 bps year over year to 25.3%.
While second-quarter results benefited from favorable commodity trends, management signaled that the cost environment could normalize in the back half of 2025. Dutch Bros expects beverage and food costs to rise toward 26% of revenues as coffee tariffs and input inflation offset dairy tailwinds. The company also anticipates higher preopening expenses tied to its 160-shop expansion plan, which could temporarily pressure margins.
Looking ahead, Dutch Bros guided to third-quarter shop contribution margins of roughly 28.5%, implying modest sequential compression as commodity benefits wane. Still, management pointed to its improving capital structure — including a 15% sequential decline in average CapEx per shop and a recently refinanced $650 million credit facility — as enablers of more sustainable profitability.
Despite near-term input cost headwinds, Dutch Bros framed its margin trajectory as structurally improving. The company’s focus on labor efficiency, supply-chain optimization and capital-light development suggests a business model increasingly geared toward consistent, high-return growth. While rising coffee costs may temper near-term gains, Dutch Bros’ cost discipline signals the foundation of a more durable margin framework in the years ahead.
BROS’ Stock Price Performance, Valuation & Estimates
Shares of Dutch Bros have declined 6.7% so far this year compared with the industry’s fall of 10.8%. In the same time frame, other industry players like Starbucks Corporation (SBUX - Free Report) , Sweetgreen, Inc. (SG - Free Report) and Chipotle Mexican Grill, Inc. (CMG - Free Report) have declined 14%, 76.5% and 34%, respectively.
BROS YTD Price Performance
Image Source: Zacks Investment Research
From a valuation standpoint, BROS trades at a forward price-to-sales (P/S) multiple of 4.24, above the industry’s average of 3.35. Conversely, industry players, such as Starbucks, Sweetgreen and Chipotle, have P/S multiples of 2.28, 1.09 and 4.01, respectively.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for BROS’ 2025 earnings per share has remained unchanged at 68 cents in the past 60 days.
Image Source: Zacks Investment Research
The company is likely to report strong earnings, with projections indicating a 38.8% rise in 2025. Conversely, industry players like Sweetgreen and Chipotle are likely to witness an increase of 10.1% and 7.1%, year over year, respectively, in 2025 earnings. Meanwhile, Starbucks' 2025 earnings are likely to witness a fall of 34.4%, year over year.
BROS stock currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.