First Watch Restaurant Group Surpasses Expectations
Like others, FWRG is talking about a tough 1Q24 but remains a Best Ideal LONG
FWRG reported strong performance in Q4, and its optimistic outlook for the fiscal year 2024 highlights its resilience and strategic positioning for growth despite slight deviations from market expectations in some areas. Focusing on expanding its footprint, improving sales and margins, and maintaining a healthy growth trajectory, First Watch continues strengthening its presence in the daytime dining segment:
Q4 Earnings Highlights
- Comparable Sales Growth: Reported at 5.0%, slightly below FS estimate of 5.1%.
- Traffic Decline: A decrease of 1.3% was recorded.
- Restaurant Revenue: Achieved $241.0 million, surpassing the FS estimate of $234.5 million.
- Franchise Revenue: Reported at $3.6 million, higher than the FS estimate of $3.3 million.
- Food & Beverage Costs: Came in at 22.5%, slightly above the FS estimate of 22.3%.
- Restaurant Margin: Exceeded expectations at 19.4%, compared to the FS estimate of 18.4%.
- Adjusted EBITDA Margin: Reached 10.1%, significantly outperforming the FS estimate of 7.5%.
- Adjusted EBITDA: Totaled $24.6 million, well above the FS estimate of $17.8 million.
Full Year 2024 Guidance
- Adjusted EBITDA: Expected to be between $106.0 million and $112.0 million, exceeding the FS estimate of $101.3 million.
- Revenue Growth: Anticipated to be 18% to 20% year-over-year, surpassing the FS estimate of 16.6%.
- Comparable Sales Growth: Forecasted to be between 1.0% and 3.0%, with flat-to-negative same-restaurant traffic growth.
- New System-Wide Restaurants: Planning to open a total of 51 to 57 locations, net of 1 company-owned restaurant closure.
- Capital Expenditures: Estimated to be between $125.0 million and $135.0 million, primarily allocated for new restaurant projects and planned remodels.
First Watch reiterates its commitment to achieving its long-term financial goals, which include:
- Unit Growth: Low double-digit percentage increase.
- Comparable Sales Growth: Approximately 3.5%.
- Restaurant Sales Growth: Mid-teens.
- Adjusted EBITDA Growth: Mid-teens percentage increase.
Strategic Alliances and Boardroom Evolution: The Chefs' Warehouse's Bold Leap Forward
In a strategic maneuver, The Chefs' Warehouse, Inc. (CHEF) aligns with Legion Partners Asset Management, LLC, holding a stake of about 3.3% of common shares. This alliance ushers in a fresh era of governance with the induction of three distinct, independently-minded directors into its echelons: Richard N. Peretz, Wendy M. Weinstein, and Lester Owens, enriching the board with their unparalleled expertise. Looking ahead, the ensemble of directors will see a streamlining of the board by reducing the number of directors to 11 from 14 post the 2024 Annual meeting, eventually condensing further to a core of 9 by the subsequent annual meeting in 2025. At the heart of this transformation lies the inauguration of an Operational and Financial Performance Task Force, set to improve efficiency and financial vigor, aided by the counsel of an independently-operated consulting firm. The pact between The Chefs' Warehouse and Legion Partners is poised for extension into a second term, contingent on the attainment of specified financial landmarks: an Adjusted EBITDA margin not falling short of 5.7% for the fiscal year 2024, with aspirations stretching to a minimum of 6.2% as per the mid-point guidance for the fiscal year 2025. Amidst the strategic realignments, the release takes a moment to cast a spotlight on the trio of board additions, delineating their storied backgrounds and the wealth of experience they bring.
Delivery Platforms Adapt to New Wage Standards: Strategies and Consequences
Data provided by DoorDash is the first comprehensive evidence suggesting that the wage increase may negatively impact delivery demand in New York City. However, this outcome is not entirely unexpected, as the city had anticipated a potential decline in demand due to the new pay standard, and many observers had expressed concerns about the impact of rising fees on customers. In a similar situation, Seattle implemented a minimum courier pay standard of approximately $26.40 an hour in January. DoorDash reported that customers placed 30,000 fewer orders in the first month, resulting in more than $1 million in lost revenue for businesses. In response, DoorDash introduced a $5 fee for customers in Seattle. As of Monday, DoorDash announced that it will be transitioning from the $29.93 "Alternative" payment method to the $17.96 "Standard" method in New York, citing the former model as "unsustainable." Consequently, the company will restrict the number of couriers who can be online at any given time and introduce a scheduling system called Dasher Rewards. This system will prioritize top-performing couriers, giving them early access to choose their working hours, "priority access to get on the road immediately," and the chance to earn bonus rewards. Uber Eats and Grubhub, both of which use the Standard method, have also implemented similar rules to balance courier supply with customer demand and minimize downtime. However, these scheduling systems effectively eliminate one of the most attractive aspects of gig work: the flexibility to work whenever one chooses. As a result, Uber has reported that "thousands" of couriers have left Uber Eats.