Peet's Coffee & Tea reports Q4 net earnings of US$5.6M, down 12% from year-ago period, weighed down by steeper costs for unroasted green coffee beans and milk; revenues up 11% to US$101.6M

EMERYVILLE, California , February 14, 2012 (press release) – Peet’s Coffee & Tea, Inc. (NASDAQ:PEET - News) today announced its fourth quarter and full-year results for the period ended January 1, 2012.

In this release, the Company:

Reports diluted earnings per share of $0.42 for the fourth quarter and $1.33 for fiscal 2011

Reports non-GAAP diluted earnings per share of $1.49 for fiscal 2011, up 12% compared to fiscal 2010 non-GAAP diluted earnings per share

Reports net revenue growth of 11% for both the fourth quarter and the year

Confirms fiscal 2012 diluted earnings per share guidance of $1.70 to $1.80

For the 13 weeks and 52 weeks ended January 1, 2012, net revenue increased 11% versus the corresponding periods of fiscal 2010.

Diluted earnings per share was $1.33 for fiscal 2011, compared to $1.28 for fiscal 2010. Excluding the litigation- and transaction-related items outlined below, non-GAAP diluted earnings per share increased 12% to $1.49 for fiscal 2011, compared to $1.33 for fiscal 2010.

“Despite record high coffee costs since becoming a public company, we finished fiscal 2011 with diluted earnings per share toward the higher end of our stated range, consistent with previous guidance,” said Patrick O’Dea, president and CEO of Peet’s Coffee & Tea. “Our sales growth continues to be strong, led by our grocery business, which grew 29% in the quarter and 30% for the year. Our performance in 2011 is a testament to our brand’s premium-quality, premium-priced position in the market and the strength of our team. With pricing in place, visibility to our 2012 coffee costs, and already established growth strategies underway, we are well positioned to achieve our goals for this year. I believe this, in combination with the many new growth opportunities in our pipeline, bodes well for our long-term growth prospects.”

Non-GAAP Information

Net income and diluted earnings per share for fiscal 2011 include $3.3 million ($0.16 per diluted share) of expenses associated with a class action lawsuit, including anticipated settlement and legal costs. These costs are reflected in the consolidated statements of income as Litigation-related expenses.

Net income and diluted earnings per share for fiscal 2010 include $1.0 million ($0.05 per diluted share) of legal and related expenses incurred by the Company for its response to the subpoena it 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. These costs are reflected in the consolidated statements of income as Transaction-related expenses.

Fourth Quarter Consolidated Financial and Operating Summary

Retail net revenue increased 3% to $56.5 million for the 13 weeks ended January 1, 2012, from $54.7 million for the corresponding period last year. The increase was driven by a 6% rise in sales of beverages and pastries. The Company opened two stores in the quarter, ending the year with 196 stores versus 192 stores at the end of fiscal 2010.

Specialty net revenue increased 22% to $45.1 million for the 13 weeks ended January 1, 2012, compared to $36.9 million for the corresponding period last year. Within specialty, grocery sales were up 29% over last year, foodservice and office sales grew 20%, and home delivery sales were flat.

Cost of sales and related occupancy expenses increased as a percent of total net revenue to 52.7% for the quarter, compared to 45.7% for the corresponding period last year. The increase resulted primarily from higher coffee costs and, to a lesser extent, higher milk costs and a mix shift towards the specialty business, which has a higher cost of sales. Price increases across the channels and lower shipping expenses partially offset the impact of these higher costs.

Operating expenses decreased as a percentage of net revenue to 28.2%, compared to 30.9% for the corresponding period last year. The decrease was due to a favorable mix shift towards the specialty business, the impact of price increases across all channels, leveraging of overhead expenses, and cost efficiencies in both our retail stores and our direct store delivery system.

General and administrative expenses decreased as a percentage of net revenue to 6.7%, compared to 8.0% for the corresponding period last year. General and administrative expenses decreased to $6.8 million from $7.3 million for the corresponding period last year, primarily due to lower payroll costs and outside services.

Depreciation and amortization expenses decreased as a percentage of net revenue to 3.9%, compared to 4.3% for the corresponding period last year. Depreciation and amortization expenses were $3.9 million for the quarter, consistent with the corresponding period last year.

Cash and cash equivalents plus short-term and long-term marketable securities were $35 million at the end of fiscal 2011, compared to $49 million at the end of fiscal 2010.

Fiscal 2012 Outlook

Looking ahead, Peet’s confirmed the following fiscal 2012 guidance:

Total net revenue growth of around 10%

Diluted earnings per share in the range of $1.70 to $1.80

Peet’s Coffee & Tea, Inc. Q4 and 2011 Year-End Conference Call

Peet’s will discuss its fourth quarter and fiscal year 2011 results via conference call today, February 14, 2012. The teleconference call will begin at 2:00 p.m. PT/5:00 p.m. ET and can be accessed by calling 866-748-8653. The call will be simultaneously webcast on the Investor Relations portion of Peet’s website, under Media Events: http://investor.peets.com/events.cfm.
A replay of the teleconference will be available from 5:00 p.m. PT/8:00 p.m. ET on February 14, 2012, until 8:59 p.m. PT/11:59 p.m. ET on February 21, 2012, at 404-537-3406 or 855-859-2056, using access code 43013095. The replay will also be archived at http://investor.peets.com/events.cfm through February 14, 2013, at 8:59 p.m. PT/11:59 p.m. ET.

The Company has posted on its website at http://investor.peets.com/events.cfm a detailed reconciliation of non-GAAP net income and non-GAAP net income per diluted share as well as non-GAAP operating income and margin on a total company and segment basis.

About Peet’s Coffee & Tea, Inc.

Peet’s Coffee & Tea, Inc. (NASDAQ: PEET - News) 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 United States. 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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