Peet's Lags on High Coffee Costs - Analyst Blog
02 Mayo 2012 - 7:00AM
Zacks
Peet's Coffee & Tea Inc. (PEET) has posted
first quarter 2012 earnings of 25 cents per share, which missed
both the Zacks Consensus Estimate and the prior-year earnings of 31
cents and 41 cents per share, respectively. The first quarter
results plunged owing to high green coffee costs.
Quarter in Detail
Net revenue climbed 7% in the first quarter 2012 to $94.8
million. Revenue, however, lagged the Zacks Consensus Estimate of
$97.0 million. Peet’s grocery business posted highest sales
increase of 12% for this quarter.
Cost of sales and related occupancy expenses increased to 51.0%
on total net revenue in the reported quarter as compared with 46.6%
last year. Higher coffee costs per pound surged 44% from the
prior-year quarter, which led to the 440 basis points (bps)
increase in overall costs. However, price increases and lower
shipping expenses partially offset the impact of these higher
costs.
Operating expenses, based on net revenue, remained flat at 31.5%
in the quarter, owing to a favorable mix shift to the specialty
business and price increases across all channels, offset by
overhead investments and increased payment card processing
fees.
Segment Details
Retail net sales moved up 4% to $54.1 million
in the first quarter of 2012, from $52.1 million a year ago. The
growth was attributable to growth in beverages and pastries as well
as whole-bean and related sales. Peet’s ended the quarter with 197
retail stores, with the opening of one store in the first
quarter.
Segment operating income plummeted 12.8% year over year to $5.7
million. Operating margin at Retail also contracted 200 bps to
10.6% in the first quarter of 2012.
Specialty net sales climbed 12% to $40.7
million for the quarter, compared with $36.4 million for the
corresponding period. Grocery business grew 12% over last year; the
foodservice and office business grew 16%; while home delivery net
revenue was flat with prior-year quarter levels.
Segment operating income plunged 19.5% to $7.7 million in the
quarter. Operating margin at Specialty also dropped 740 bps to
18.9%.
Other Financial Details
At the end of April 1, 2012, cash and cash equivalents were
$45.0 million, as compared to $30.8 million at the end of January
1, 2012.
Guidance
The company reaffirmed its 2012 earnings guidance to be in the
range of $1.70 to $1.80 per share. The company also expects its
total net revenue to grow around 10% for 2012.
Recently, Peet’s competitor Starbucks
Corporation (SBUX) reported earnings of 40 cents per share
for fiscal second quarter 2012, beating the Zacks Consensus
Estimate by a penny. Quarterly earnings increased 18% year over
year driven by a solid top line, improved efficiencies and cost
control. The company also raised its fiscal 2012 outlook due to
improving business trends and strong first half results.
Our Recommendation
Though Peet’s results were disappointing owing to higher cost
inflation, we believe that the company will deliver strong earnings
growth in the later half of the year, while continuing to explore
and invest in additional growth initiatives. We are encouraged by
Peet’s growth momentum and plenty of new growth opportunities
available for the company.
Peet’s currently holds a Zacks #2 Rank (short-term Buy rating).
Over the long-term, we provide a Neutral recommendation on the
stock.
PEETS COFFE&TEA (PEET): Free Stock Analysis Report
STARBUCKS CORP (SBUX): Free Stock Analysis Report
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