Key Points
First Watch Restaurant Group grew sales by 17% in Q1 and reiterated guidance for 13% revenue growth in 2026.
The company continues to expand its footprint as quickly as possible while growing cash from operations.
The daytime diner stands out from the crowd with its seasonal menus and chef-inspired dishes, and has become a rare growth story in the diner niche.
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Shares of quickly growing daytime diner First Watch Restaurant Group (NASDAQ: FWRG) are up 6% as of 3 p.m. ET on Tuesday after the company reported solid first-quarter earnings. First Watch's earnings per share were negative $0.04, a penny short of analysts' expectations, but its 17% sales growth beat expectations. Most importantly, the company reiterated guidance for same-store sales (SSS) to grow between 1% and 3% and overall sales to grow by 12% to 14%, prompting First Watch's shares to pop, after they hit an all-time low in March this year.
The full stats for First Watch's Q1 earnings included:
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- SSS growth of 3%, despite a traffic decline of 2%
- 16 restaurant openings in 11 states, bringing its total count to 648 across 32 states
- guidance for 59 to 63 restaurant openings in 2026
- guidance for $133 million to $140 million in 2026, compared to the company's market cap of $752 million
- a strong ROI on increased marketing spend and a new menu revamp
Image source: Getty Images.
First Watch Restaurant Group is a unique diner that only operates during breakfast, brunch, and lunch hours, enabling employees to work a single seven-hour shift. The company's innovative menu items are rotated seasonally and are curated by chefs using healthy, fresh, and creative ingredients. Powered by its distinct offering, First Watch has been taking the U.S. by storm recently, growing sales by 18% annually over the last three years.
Currently, the company is generating roughly $130 million in cash from operations (CFO) annually, but is spending even more on capex for new stores, which management projects will be between $150 million and $160 million in 2026. It is important for investors to monitor these new figures, as First Watch's growing CFO could soon allow it to fund its expansion plans entirely in-house, reducing shareholder dilution. Trading at just 6 times CFO, First Watch is a promising young growth stock in an often underwhelming dining industry -- and I happily hold it as a starter position.
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Josh Kohn-Lindquist has positions in First Watch Restaurant Group. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
