Why First Watch Restaurant Stock Is Sinking Today

2026-02-24 12:37:20 ET

Shares of daytime diner First Watch Restaurant Group (NASDAQ: FWRG) are down 13% as of 11 a.m. ET on Tuesday after the company reported fourth-quarter earnings. While the market's reaction to First Watch's Q4 earnings and guidance was adverse, I think it may be an overreaction. The company's 20% sales growth matched Wall Street's expectations, and its earnings per share of $0.24 tripled analysts' expectations. For the full year, First Watch grew its store count by 11% and delivered same-store sales (SSS) growth of 3.6%.

Despite these exceptional figures, the company's conservative guidance worried the market. Management guided for 2026 revenue growth of 12% to 14%, while SSS would increase only 1% to 3% -- both declines from 2025. Similarly, the company guided for its store count to grow 9%, compared with historical double-digit growth. Noting this soft guidance, Chief Executive Officer Chris Tomasso explained, "I do think that the entire category has reason to be cautious here in February about what's gonna ensue for the balance of the year." While consumer spending remains weak, First Watch has held up well in this pressured environment. Black Box Intelligence estimated that same-store traffic declined 1.9% in 2025, but First Watch delivered 0.5% same-store traffic growth, continuing its long-term outperformance on this metric.

Image source: Getty Images.

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