What Happened?
Shares of breakfast restaurant chain First Watch Restaurant Group (NASDAQ: FWRG) fell 19.4% in the afternoon session after the company reported weak first quarter 2025 results which featured a significant miss on full-year EBITDA guidance and EBITDA that fell short of Wall Street's estimates. While revenue grew 16% and met estimates, same-restaurant sales barely rose, and traffic actually declined slightly, underscoring a more cautious consumer and softer in-store trends. Overall, this was a weaker quarter.
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What The Market Is Telling Us
First Watch’s shares are very volatile and have had 25 moves greater than 5% over the last year. But moves this big are rare even for First Watch and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 12 months ago when the stock dropped 16.2% on the news that the company reported first-quarter earnings results. Its revenue unfortunately missed analysts' expectations, and full-year guidance for revenue was lowered slightly.
On the other hand, adjusted EBITDA and gross margin came in ahead of expectations, partly due to improved pricing. However, the company noted that consumers are being more cautious in their spending habits, resulting in fewer dining-out occasions across the industry.
Management added that while same-restaurant traffic trend improved month-on-month in Q1, it remains negative mid-single-digit quarter-to-date. The trend is expected to extend to Q2, while same-restaurant traffic in the second half of 2024 is expected to be relatively flat. Overall, this was a weaker quarter for the company.
First Watch is down 18.4% since the beginning of the year, and at $15.34 per share, it is trading 39% below its 52-week high of $25.13 from May 2024. Investors who bought $1,000 worth of First Watch’s shares at the IPO in September 2021 would now be looking at an investment worth $693.00.
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