Black Rock Coffee Bar’s sales grow, thanks to extended hours

Black Rock Coffee Bar's same-store sales rose 5.8% last quarter. Photo: Shutterstock

Keeping its coffee shops open longer apparently worked well for Black Rock Coffee Bar last quarter.

The Scottsdale, Arizona-based coffee shop chain on Tuesday said that its same-store sales rose 5.8% last quarter, with transactions up 2.4%. Revenues rose 29.7%, and the company’s net income more than doubled, to $2.7 million.

At least part of the reason was relatively simple. Its shops are open longer. The company kept 70% of its shops open later into the evenings, to 8 p.m. or 9 p.m. in many cases. Black Rock sold more food, such as cake pops and grilled cheese sandwiches that it recently added to its menu and lured in more younger consumers.

“It’s certainly a younger demographic,” CEO Mark Davis told analysts on Tuesday, according to a transcript on the financial services site AlphaSense. “When we made the decision to make them permanent, they are definitely profitable. They are contributing to the same-store sales, and they’re contributing to the transactions.”

Davis said that the company believes it can generate stronger sales in the afternoons and evenings, based on the success of many of its competitors. Brands like Dutch Bros, also based in Arizona, and 7 Brew have been growing rapidly, in part based on their ability to lure in more customers after noon.

He also believes Black Rock has an advantage, because it has a stronger lineup of food items and dining rooms. “We see that as an opportunity,” Davis said. “We see through our engagement, through our dining rooms, and certainly through the food offerings we provide, including food, that it’ll continue to grow and be more successful.”

Investors were less than convinced. The company’s stock was down 4% in off-hours trading and has lost more than half its value this year.

The company operates in one of the highest-growth sectors in the industry, as consumers eschew some of their visits to traditional fast-food chains in favor of an afternoon shot of cold coffee.

The company has been opening locations at a heavy clip to take advantage of this growing demand. It opened 11 new shops in the quarter, and expects to open 40 for the full year, up from the 38 locations it expected to open this quarter. Black Rock has had particular success in California, where the chain generated some record weeks recently.

The new stores are opening with the longer hours, which are generating higher volumes and stronger overall performance, Davis said.

The chain has also been able to take advantage of a real-estate market with plenty of second-generation sites. And the company’s flexibility on shop types helps it adapt to many of these locations.

Davis also said that the company’s smaller size gives it a unique advantage in negotiating for such locations. “As a smaller company, we’re a bit more nimble,” he said. “When you think of yourself as a landlord, they want somebody that can come go through the permitting quickly, that can adapt and get that open and get it going. It allows them to charge rent faster. That’s a big advantage for us.”