Peet's Coffee & Tea posts Q3 earnings of US$3.8M, up 52% from a year ago; sales up 9% year-over-year to US$80.2M; results driven by strong growth in grocery business, major operating improvement in stores

Graziela Medina Shepnick

Graziela Medina Shepnick

Nov 2, 2010 – Business Wire

EMERYVILLE, California , November 2, 2010 (press release) – Peet’s Coffee & Tea, Inc. (NASDAQ:PEET - News) today announced its third quarter 2010 results for the period ended October 3, 2010, which included 13 weeks.

In this release, the company:

    * Reports third quarter diluted earnings per share of $0.28, an increase of 47% versus the corresponding period last year
    * Reports third quarter net revenue of $80.2 million, an increase of 9% versus the corresponding period last year
    * Raises guidance for full-year diluted earnings per share by $0.03
    * Gives guidance for 2011 diluted earnings per share of $1.53 to $1.60.

For the 13 weeks ended October 3, 2010, net revenue increased 9% to $80.2 million from $73.9 million for the corresponding period last year.

Net income for the quarter increased 52% to $3.8 million, or $0.28 per diluted share, compared to $2.5 million, or $0.19 per diluted share, for the corresponding period last year.

“We made excellent progress this quarter,” said Patrick O’Dea, CEO and president of Peet’s Coffee & Tea. “We drove strong growth in our grocery business and achieved major operating improvement in our stores. It’s a real testament to the strength of our people and to the loyalty of our customers. We’re excited as we enter the holiday season and feel good about our growth plans for 2011.”

Financial and Operating Summary

Retail net revenue increased 4% to $49.8 million for the 13 weeks ended October 3, 2010, from $47.9 million for the corresponding period last year. The increase was solely due to growth in existing stores.

Specialty net revenue increased 17% to $30.4 million compared to $26.0 million for the corresponding period last year. Within the specialty business, grocery sales grew 24%, the foodservice and office business was up 11%, and home delivery sales were flat compared to the same period last year.

Cost of sales and related occupancy costs increased as a percentage of net revenue to 47.5%, compared to 46.4% for the corresponding period last year. The increase from last year was due to higher commodity costs, specifically coffee and milk, and a shift in mix towards grocery, with both Peet’s and Godiva brands, which have lower gross margins than our retail business.

Operating expenses decreased as a percentage of net revenue to 33.1%, compared to 35.2% for the corresponding period last year. The decrease was due primarily to a favorable mix shift to the specialty channel, where operating expenses are lower, and to effective cost management in the retail business.

General and administrative expenses were consistent with last year at $5.7 million, as increases in payroll-related costs were offset by lower marketing expenses.

Depreciation and amortization expense was consistent with last year at $3.9 million as new capital expenditures were offset by newly fully depreciated assets.

Fiscal 2010 Full Year Outlook

Looking ahead, Peet’s raised its earnings guidance for the year based on current results:

    * Diluted earnings per share are now expected to be in the $1.25 to $1.28 range for the 52 weeks ending January 2, 2011. This is a $0.03 increase from prior guidance of $1.22 to $1.25. This estimate includes approximately $1.0 million ($0.05 per diluted share) of expenses related to the subpoena the company received from the Federal Trade Commission (FTC) in connection with the FTC’s anti-trust review of the acquisition of Diedrich Coffee by Green Mountain Coffee Roasters. Excluding the expenses related to the FTC subpoena, Peet’s raised its non-GAAP diluted earnings per share guidance $0.03 per share to $1.30 to $1.33 for fiscal 2010.

Fiscal 2011 Outlook

Looking ahead, Peet’s provided the following fiscal 2011 guidance:

    * Total net revenue is expected to grow 8% to 10%.
    * Diluted earnings per share are expected to be in the range of $1.53 to $1.60.

Peet’s Coffee & Tea, Inc. Q3 2010 Conference Call

The company will host a conference call beginning at 2:00 p.m. PT/5:00 p.m. ET on November 2, 2010, which can be accessed by calling 1-866-748-8653. The call will be simultaneously webcast on Peet’s website at www.peets.com.

A replay of the teleconference will be available from 5:00 p.m. PT/8:00 p.m. ET on November 2, 2010, through 8:59 p.m. PT/11:59 p.m. ET on November 9, 2010, at 1-800-642-1687 or 1-706-645-9291, using access code 16459848. It will also be archived at http://investor.peets.com/medialist.cfm through November 2, 2011, at 8:59 p.m. PT/11:59 ET.

ABOUT PEET’S COFFEE & TEA, INC.

Peet's Coffee & Tea, Inc., (PEET), is the premier specialty coffee and tea company in the United States. The company was founded in 1966 in Berkeley, Calif. by Alfred Peet. Peet was an early tea authority who later became widely recognized as the grandfather of specialty coffee in the U.S. Today, Peet’s Coffee & Tea offers superior quality coffees and teas in multiple forms, by sourcing the best quality coffee beans and tea leaves in the world, adhering to strict high quality and taste standards, and controlling product quality through its unique direct store delivery selling and merchandising system. Peet’s is committed to strategically growing its business through many channels while maintaining the extraordinary quality of its coffees and teas. For more information about Peet's Coffee & Tea, Inc., visit www.peets.com.

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