Investors are keeping a close eye on coffee chain Starbucks (NASDAQ: SBUX) as the company’s recent earnings report has left much to be desired. With shares plummeting 14% following the release of its second-quarter results for fiscal 2024, it’s clear that challenges lie ahead for the popular coffee giant.
One of the key metrics that investors are looking at is same-store sales, which declined by 4% year over year for Starbucks. This drop was seen both domestically in the U.S. and internationally, including major markets like China. Additionally, Starbucks’ CEO Laxman Narasimhan admitted during the earnings call that the company is struggling to drive demand beyond the usual morning commuter rush.
In contrast, a smaller coffee chain called Dutch Bros (NYSE: BROS) has been gaining momentum with impressive growth numbers. For the same period ended March 31, Dutch Bros reported a 10% increase in same-store sales and a 40% rise in revenue year over year. This positive performance has led Dutch Bros to raise its full-year 2024 revenue and profit guidance, in stark contrast to Starbucks lowering its guidance.
While Dutch Bros may seem like a more attractive investment option with its strong growth numbers, investors should be cautious. Despite being perceived as a luxury brand with higher prices, Starbucks remains a financially robust operation with a global presence. Dutch Bros, on the other hand, is still primarily a West Coast operation and has a long way to go before reaching the scale of Starbucks.
Ultimately, investors looking for growth opportunities outside of traditional sectors may find Dutch Bros appealing. While the stock may be a bit pricey at the moment, the company’s organic growth and positive outlook suggest potential upside for long-term investors.