A class action lawsuit filed this month alleges that the coffee roasting and retail chain Dutch Bros misled investors in 2022, resulting in financial injuries to shareholders.
Filed by class action specialist firms GPM and Holzer & Holzer on behalf of lead plaintiff Jerry Peacock, the suit claims that the Oregon-based, publicly held coffee company and two of its top executives violated the Securities Exchange Act of 1934.
Specifically, the lawsuit claims that quarterly financial results reported in 2022 — and a subsequent decline in the company’s stock price — did not reflect public reassurances regarding a more positive outlook made by executives CEO Jonathan “Joth” Ricci and CFO Charles Jemley earlier in the year.
Dutch Bros did not immediately respond to DCN’s request for comment regarding the lawsuit, which was filed earlier this month in the Southern New York United States District Court.
The suit cites a press release and investor call presented by Dutch Bros on May 11, 2022, in which it shared financial results from the first quarter of 2022, including a net loss of $16.3 million, as well as an adjusted net loss of $2.5 million (the equivalent of 2 cents per share). During that Q1 2022 period, Dutch Bros also opened 34 new shops while reporting total quarterly revenues of $152.2 million, as compared to $98.8 in Q1 2021.
At the time, Dutch Bros CEO Ricci told investors that the quarterly performance was negatively affected, in part, due to the rising costs of dairy, as well as inefficiencies associated with new store development, among other factors.
On the following day, May 12, the Dutch Bros share price closed down by $9.26, or 26.9%, to $25.11 per share.
The lawsuit claims that statements made by the company and its executives leading up to the May 11 call were “materially false and/or misleading” and that the company “failed to disclose adverse facts regarding business, operations and prospects.”
Founded in Grants Pass, Oregon, in 1992, Dutch Bros has grown steadily over the years to become one of the country’s top five coffee chains by both store volume and revenue. The company also routinely initiates charitable campaigns through its associated nonprofit foundation.
As of December 31, 2022, Dutch Bros had 671 shops across 14 U.S. states, including 396 company-operated stores and 275 franchise locations. The company opened 130 new shops in 2022, and plans to open at least 150 new shops this year.
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Nick Brown is the editor of Daily Coffee News by Roast Magazine.