Shares of Dutch Bros. (BROS) are rebounding on Friday, up more than 12% at market open, after dropping as much as 55% at the market-open on Thursday.
The major swing followed the announcement of a revised outlook and inflationary pressures that took a toll on the company's first-quarter earnings results. But Dutch Bros CEO Joth Ricci remains confident about the road ahead. In the report, the growing drive-thru coffee chain raised its store opening guidance to 130 locations in 2022.
"We've been focused on the long-term here, we're building something for the future," Ricci told Yahoo Finance Live in a recent interview. He acknowledged that this sort of stock movement comes with the territory of being a newly public company, with Dutch Bros now nearly eight months into its journey of being listed on the New York Stock Exchange.
"You ride the highs, and you have to ride the lows. There will be volatility as we go through this journey," he said, adding that the company is determined to stay disciplined and focused on the long-term with the consumer as top priority.
Inflation hits quarterly results, consumers won't get hit with menu hikes for now
In the first quarter, prices of dairy — which makes up 28 percent of Dutch Bros' commodity basket — rose prices rose 25%, a "record high in such a short period of time," Ricci noted.
In the earnings call, Dutch Bros CFO Charley Jemley noted the company plans to increase menu prices by the end of May, and shared that further price hikes may occur to "protect shop profitability long term," depending on the macro headwinds that continue to hit the chain and industry at-large.
Ricci emphasized that the team is keeping an eye on inflation and is "very mindful" of any further increases, noting there are no plans for significant price hikes anytime soon.
"We traditionally have not taken large price increases," he said. "We find that if we take small chunks of price and we kind of manage accordingly with what happened with inflation, that's a better rhythm for us, that's a better rhythm for our customer, it's a better rhythm for our people in the stands."
Gas prices hit midday consumer demand
Ricci said rising gas prices are taking a toll on consumer demand in the middle of the day, with consumers more aware of discretionary spending and what he called "the second spend of the day."
"We've seen that impact from kind of a post-10 a.m. until around 8 p.m. time period ... literally the last 19 days [of March] through to April, we've seen that change happen," he shared.
"Our morning day part is actually growing, so our pre-10 a.m. business is actually up and I think that's back to maybe some back to work patterns," Ricci shared.
Momentum to move west coast to east coast prevails
Despite the major economic headwinds hitting the industry at large, Dutch Bros has no plans to slow down its expansion plans.
In the first-quarter, the company opened 34 new shops, making it the second-highest quarterly opening count on record. For 2022, the company raised its store opening guidance to 130, and in the next 10 to 15 years, the company plans to open nearly 4,000 Dutch Bros shops.
"We're confident in 130 locations that will open this year," he said. "We've seen our new stands come out of the ground with higher than average AUV's (average unit volume) for the system."
Of the 34 shops opened in the first quarter, 11 are in new markets, including the company's first shop east of the Mississippi River, in Nashville, Tennessee, followed with two additional shop openings in the surrounding area. In addition, the company opened five new shops in Southern California.
"As long as those [new stores] continue to show strength and show strong output, we'll continue to go, and we haven't seen any indicators to tell us that that's a bad idea" to expand, he said.
"Our balance street is strong, we've got plenty to work with, and we feel like the strength in our development is strong ... We don't see that slowing down at all."
Shares of Dutch Bros are down nearly 43% since its public debut.
Brooke DiPalma is a producer and reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at email@example.com.