"First Watch Stock Slips as Executives Warn of Egg Costs Hurting Margins"

First Watch Stock Slips as Executives Warn of Egg Costs Hurting Margins

Listen up, folks! First Watch Restaurant Group, Inc. (FWRG) is in the hot seat today as executives warn of rising egg costs eating into their margins. The stock is taking a hit, and investors are on edge. Let's dive into the details and figure out what this means for your portfolio.

First Watch reported some impressive numbers for 2024. Total revenues hit $1.0 billion, a 13.9% increase from the previous year. System-wide sales also saw a boost, up 7.4% to $1.2 billion. But here's the kicker: net income dropped to $18.9 million from $25.4 million in 2023. That's a 25.45% decrease, and it's got investors worried.

The culprit? Rising ingredient costs, particularly eggs. Eggs are a staple in First Watch's breakfast and brunch menu, and the recent price hikes are taking a toll on their profitability. In Q4 2024, the restaurant level operating profit margin decreased to 18.8% from 19.4% in Q4 2023. That's a red flag, folks!

But don't panic just yet. First Watch has a solid financial foundation. Their adjusted EBITDA of $113.8 million shows strong operational efficiency. And they've got a plan to tackle these rising costs.

First Watch is looking at menu engineering to reduce reliance on eggs. They're also negotiating better terms with suppliers and implementing stricter cost control measures. Plus, they're considering price adjustments and promotional strategies to maintain customer traffic and sales.



Now, let's talk about the long-term effects on First Watch's stock performance. The company's growth potential and long-term financial targets are encouraging. But the decrease in net income and the potential for continued increases in egg costs could raise concerns.

Investors need to stay vigilant. Keep an eye on First Watch's next earnings report and their strategies to mitigate rising ingredient costs. This is a company with strong fundamentals, but it's facing some headwinds. Stay tuned, folks, because this story is far from over!

So, what's the verdict? Should you buy, sell, or hold First Watch? That's up to you, but remember, this is a company with a proven track record and a solid plan to navigate these challenges. Don't miss out on this opportunity, but stay cautious. The market hates uncertainty, and right now, there's plenty of it.