CBOU Caribou Coffee Company, Inc. (MM)

Caribou Coffee Company, Inc. (CBOU) posted second quarter 2011 adjusted earnings of 13 cents per share, exceeding the Zacks Consensus Estimate of 9 cents per share and the year-ago quarter's earnings of 7 cents per share.

The company’s net sales during the quarter increased 16.5% to $80.3 million, aided by improved performance across all its business lines.

Performance Highlights

Segment wise, Coffeehouse sales spiked 3.9% year over year to $60.0 million during the quarter, driven by a 4.6% jump in comparable coffeehouse sales. Commercial sales soared 94.3% to $16.8 million, due to higher sales from existing and new customers. Franchise revenues rose 37.9% to $3.4 million due to higher product sales and royalties.

Cost of sales and related occupancy cost jumped 24.1% to $37.9 million in the second quarter of 2011, driven by higher sales in the quarter. Operating expense rose 7.0% to $26.8 million attributable to the rise in variable cost. General and administrative expense spiked 6.7% to $8.1 million, but depreciation and amortization expenses declined 9.7% to $2.8 million due to less depreciable assets.

Total operating income more than tripled to $4.6 million and operating margin increased 200 basis points (bps) to 5.8% as total expense based on revenue dropped 200 bps due to operating efficiencies.

Store Update

During the quarter, Caribou Coffee opened 12 franchised coffeehouses and closed two company-owned coffeehouses. At the end of the quarter, the company had 407 company-owned and 147 franchised coffeehouses.

Financial Position

Caribou Coffee ended the second quarter with cash and cash equivalents of $32.5 million and shareholders’ equity of $92.8 million.

Outlook

The Minneapolis, Minnesota-based company raised its outlook for 2011. The company now expects net sales growth in the range of 11% to 13%, up from the previous guidance of 7% to 9%. Adjusted earnings are estimated in the range of 39 cents to 41 cents per share versus the earlier projection of 35 cents to 37 cents per share.

Our Take

We expect estimates to increase for fiscal 2011 and 2012 as the company witnessed robust growth across all the three segments. Caribou Coffee continues to make efforts to enhance shareholder value.

Caribou Coffee also raised its fiscal 2011 outlook based on strong first half 2011 results. The Zacks Consensus Estimates for 2011 and 2012 are pegged at 40 cents and 47 cents, respectively.

 
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