Peet's Coffee & Tea's Q1 net income up 77.4% to US$5.5M as net revenue grew 9% to US$88.5M; company lowers its full-year diluted EPS guidance by US$0.10 to US$1.43-US$1.50 range on rising coffee prices

EMERYVILLE, California , May 3, 2011 (press release) – Peet’s Coffee & Tea, Inc. (NASDAQ:PEET - News) today announced its first quarter results for the fiscal period ended April 3, 2011, which included 13 weeks.

In this release, the company:

    * Reports net revenue growth for the quarter of 9%
    * Reports diluted earnings per share of $0.41, up 86% versus 2010 diluted earnings per share of $0.22 and up 58% versus 2010 non-GAAP diluted earnings per share of $0.26
    * Reaffirms 2011 full-year total net revenue growth in the 8% to 10% range
    * Lowers full-year diluted earnings per share guidance by $0.10 to the $1.43 to $1.50 range, driven entirely by the significant rise in coffee costs during the last three months

For the 13 weeks ended April 3, 2011, net revenue increased 9% to $88.5 million from $81.2 million for the corresponding period of fiscal 2010.

Net income for the 13 weeks ended April 3, 2011, was $5.5 million compared to $3.1 million for the corresponding 13-week period of fiscal 2010. Diluted earnings per share was $0.41 for the 13-week period of fiscal 2011 compared to $0.22 per share for the corresponding period of fiscal 2010, an increase of 86%.

Last year’s net income included $0.8 million ($0.5 million net of tax) of legal and related expenses the company incurred to comply with a subpoena it received from the Federal Trade Commission in connection with its anti-trust review of the proposed Green Mountain Coffee Roasters acquisition of Diedrich Coffee. Excluding this unusual item from last year’s results, diluted earnings per share increased 58% compared to non-GAAP diluted earnings per share of $0.26 for the corresponding period last year.

“We had a very good first quarter and the fundamentals of our business are strong,” said Patrick O’Dea, president and CEO of Peet’s Coffee & Tea. “We experienced good sales growth across all channels, with our grocery business growing the strongest at 22% this quarter. With excellent overall cost management, we translated this into a record first quarter operating margin of 9.8% and EPS growth of 58%. Looking forward, we have good momentum and plenty of new growth opportunities. While we expect to offset most of the year-over-year coffee cost increase we’re experiencing, we will continue to act in the long-term best interests of our business and not overreact to the recent run-up in world coffee prices.”

Consolidated Financial and Operating Summary

Retail net revenue increased 4% to $52.1 million for the 13 weeks ended April 3, 2011, from $50.1 million for the corresponding period of fiscal 2010. The increase was solely attributable to sales growth in existing stores. The company ended the quarter with 193 stores, the same number of stores as the end of the first quarter in 2010.

Specialty net revenue increased 17% to $36.4 million for the 13 weeks ended April 3, 2011, compared to $31.1 million for the corresponding period of fiscal 2010. Within specialty, the grocery business grew 22% over last year; the foodservice and office business grew 11%; and home delivery net revenue grew 4%.

Cost of sales and related occupancy expenses were 46.6% of total net revenue, compared to 46.2% for the corresponding period last year. The increase resulted from higher coffee costs and a mix shift towards the specialty business, which has a higher cost of sales, offset by the impact of price increases across all channels.

Operating expenses as a percentage of net revenue decreased to 31.5% from 34.3% for the corresponding period last year due to a favorable mix shift to the specialty business, the impact of price increases across all channels, leveraging of retail overhead costs, and lower training expenses in retail stores.

In the corresponding period last year, the company incurred $0.8 million ($0.5 million net of tax) in legal and related fees to comply with a subpoena the company received from the Federal Trade Commission in connection with its anti-trust review of the proposed Green Mountain Coffee Roasters acquisition of Diedrich Coffee.

General and administrative expenses as a percentage of net revenue were 7.7% of net revenue, compared to 7.8% for the corresponding period last year. General and administrative expenses increased to $6.8 million, compared to $6.3 million for the corresponding period last year, primarily due to higher payroll-related costs and marketing expenses.

Depreciation and amortization expenses as a percentage of net revenue decreased to 4.4% of net sales compared to 4.8% for the corresponding period last year. Depreciation and amortization expenses were $3.9 million, consistent with the corresponding period last year.

The company ended the first quarter of 2011 with cash and cash equivalents plus investments of $43 million, compared to $49 million at year end 2010.

Fiscal 2011 Full-Year Outlook

The company has updated its full-year guidance as follows:

    * Reaffirms full-year total net revenue growth in the 8% to 10% range
    * Lowers full-year diluted earnings per share guidance by $0.10 to the $1.43 to $1.50 range, driven entirely by the significant rise in coffee costs during the last three months

Peet’s Coffee & Tea, Inc. Q1 2011 Conference Call

Peet’s will discuss its first quarter 2011 earnings via conference call today, May 3, 2011. The teleconference call will begin at 2:00 p.m. PT/5:00 p.m. ET and 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 May 3, 2011 through 8:59 p.m. PT/11:59 p.m. ET on May 10, 2011, at 1-800-642-1687 or 1-706-645-9291, using access code 61472579. It will also be archived at http://investor.peets.com/medialist.cfm through May 3, 2012, at 8:59 p.m. PT/11:59 p.m. 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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