Peet's In Line, Affirms Outlook - Analyst Blog
November 02 2011 - 5:30AM
Zacks
Peet's Coffee & Tea Inc. (PEET) reported
third quarter 2011 earnings per share of 28 cents, which surpassed
the Zacks Consensus Estimate by a penny. The results were in line
with the prior-year period earnings.
Including the anticipated settlement and legal costs of a class
action lawsuit of $2.2 million after tax, reported earnings came in
at 11 cents per share in the third-quarter of 2011 versus 28
cents.
The company affirms its 2011 earnings will be at the higher end
of the previous guidance range of $1.43 to $1.50. In addition,
Peet’s expects its 2011 reported earnings to be at the higher end
of the $1.27 to $1.34 range, including litigation-related expenses
of 16 cents per share.
Further, Peet’s anticipates its 2012 earnings to be in the range
of $1.70 to $1.80.
Revenues and Operating Profits
Net revenue climbed 14% to $91.2 million from $80.2 million for
the corresponding period of fiscal 2010. Strong sales growth was
fuelled by grocery business that was at its strongest at 38% for
this quarter. Revenues also surpassed the Zacks Consensus Estimate
of $90.0 million.
Management stated that the quarter saw strong fundamentals and
robust business growth. Sales growth was strong across all
channels. The company thus affirms its total net revenue growth
guidance to be in the range of 10% to 12% for fiscal 2011. It also
expects net revenue to grow around 10% for 2012.
Cost of sales increased to 51.6% based on total net revenue in
the reported quarter as compared with 47.5% last year, on the back
of higher coffee costs and higher milk costs and a mix shift
towards the specialty business. However, price increases and lower
shipping expenses partially offset the impact of these higher
costs.
Operating expenses, based on net revenue, came down to 31.3%
from 33.1% last year, owing to a favorable mix shift to the
specialty business, price increases across all channels, leveraging
overhead costs, and effective cost management in retail stores.
Segment Details
Retail net sales moved up 5% to $52.3 million
in the third quarter 2011, from $49.8 million a year ago. The
growth was attributable to 7% sales growth in beverages and
pastries. Peet’s ended the quarter with 194 stores versus 193
stores at the end of the third quarter 2010. It opened one store in
the quarter. However, operating income for Retail plummeted 65.5%
year over year to $1.6 million.
Specialty segment’s net revenue climbed 28% to
$38.9 million for the quarter, compared with $30.4 million for the
corresponding period of fiscal 2010. Grocery business grew 38% over
last year; the foodservice and office business grew 18%; and home
delivery net revenue grew 3%. Specialty segment reported operating
income of $7.7 million, 1.7% lower than the year ago period.
Other Financial Details
At the end of the third quarter 2011, cash and cash equivalents
plus investments were $12 million as compared with $49 million at
year end 2010.
Total assets were $198.6 million at quarter-end, with
shareholders’ equity of $163.1 million.
Management sees momentum and plenty of new growth opportunities
for the company. It expects to deliver strong sales and earnings
growth, while continuing to invest in and explore additional growth
initiatives.
Peet’s is a growing company. The company’s high quality standard
and variety are maintained by its vertically integrated business
model. However, the highly competitive nature of specialty coffee
category, presence of strong competitors like Coca-Cola
Enterprises Inc. (CCE) and Starbucks
Corporation (SBUX) and the vulnerability of coffee prices
to weather and pest damage concerns us.
Currently, Peet’s holds a Zacks # 3 Rank, which translates into
a short-term Hold rating. On a long-term basis, we prefer to rate
the stock as Neutral.
COCA-COLA ENTRP (CCE): Free Stock Analysis Report
PEETS COFFE&TEA (PEET): Free Stock Analysis Report
STARBUCKS CORP (SBUX): Free Stock Analysis Report
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