Dutch Bros Tightens Cost Controls: Are Margin Gains Sustainable?

Dutch Bros Inc. BROS 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, Sweetgreen, Inc. SG and Chipotle Mexican Grill, Inc. CMG have declined 14%, 76.5% and 34%, respectively.

BROS YTD Price Performance

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.

The Zacks Consensus Estimate for BROS’ 2025 earnings per share has remained unchanged at 68 cents in the past 60 days.

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.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research