First Watch announces Q1 growth amid market headwinds By Investing.com

First Watch Restaurant Group, Inc. (NASDAQ: FWRG) announced its first-quarter earnings for the fiscal year 2024, revealing a mix of growth and caution amid challenging market conditions. The company reported system-wide sales of $289.6 million, total revenues of $242.4 million, and an adjusted EBITDA of $28.6 million.

Despite the headwinds, First Watch achieved positive same-restaurant sales and improved labor management. The company’s focus on long-term growth is supported by the opening of nine new restaurants, the acquisition of 21 franchise-owned restaurants, and the implementation of in-restaurant technology enhancements.

Key Takeaways

• First Watch reported $289.6 million in system-wide sales and $242.4 million in total revenues.
• Adjusted EBITDA for the quarter was $28.6 million.
• Nine new restaurants were opened in eight states, and 21 franchise-owned restaurants were acquired.
• The company experienced positive same-restaurant sales and market share gains.
• First Watch remains focused on long-term growth and is enhancing the customer experience with tech advancements.

Company Outlook

• First Watch has adjusted its full-year outlook, with total revenue growth expected to be 17%-19%.
• Same-restaurant sales growth is projected to be flat to up 2%.
• The company plans to open 51 to 57 net new system-wide restaurants.
• Commodity inflation is anticipated to be 2%-4%, with restaurant-level labor cost inflation projected at 5%-7%.
• Adjusted EBITDA guidance remains unchanged at $106 million to $112 million, and capital expenditures are expected to be $125 million to $135 million.

Bearish Highlights

• The company has lowered its revenue growth and same-restaurant sales growth projections.
• General and administrative expenses increased to $27.7 million, mainly due to additional headcount.
• Two restaurants were closed, bringing the total to 531 system-wide.

Bullish Highlights

• The acquisition of franchise-owned restaurants contributed positively to revenue and adjusted EBITDA.
• First Watch reported a restaurant-level operating profit of $49.9 million, with a margin of 20.8%.
• Employee turnover has declined, resulting in improved labor cost management.

Misses

• Despite the positive financials, First Watch has revised its outlook due to expected market challenges.

Q&A Highlights

• CEO Christopher Tomasso expects comps to flatten out in the second half of the year.
• The company has pricing power but is taking a…