Key Takeaways

Shares of First Watch Restaurant Group ( FWRG ) dropped on Tuesday as the breakfast chain said it expects high prices of eggs and other commodities will likely pressure its margins this year.

"Although we contract annually for our eggs, which ensures our supply and protects us from the most severe price volatility, the continuing impact of the avian influenza has necessitated that our egg supplier will be supplemented with purchases subject to spot market pricing," First Watch CFO Mel Hope said in Tuesday's earnings call, according to a transcript provided by AlphaSense.

CFO Says Commodity Inflation Likely to Last Through This Year

Hope said high prices of avocados, bacon, and coffee beans mean that the company expects "high-single-digit percent" commodity inflation to be a factor over much of this year. CEO Chris Tomasso said the company knows "that the consumer is facing a lot of pressure everywhere they turn these days."

The executives said First Watch is prepared to absorb the higher costs without adding an egg surcharge like some breakfast competitors , as they believe it could help them gain market share like they did during previous egg price spikes caused by bird flu.

First Watch on Tuesday reported earnings per share (EPS) of $0.01 on $263.3 million in revenue, each roughly in line with analysts' estimates compiled by Visible Alpha. Same-restaurant sales declined by 0.3% year-over-year, better than estimates of a 0.48% drop. The chain said it expects "same-restaurant sales growth in the positive low-single digits" for fiscal 2025, in line with the 2.2% consensus.

First Watch shares were down roughly 4% Tuesday afternoon. They have lost nearly 30% of their value over the last 12 months.

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