Peet’s Reports $94.8 Million Quarter

Peet's Coffee & Tea reports sales increased 7.1 percent to $94.8 million in earnings up from $88.5 million in the same quarter last year.

Analysts had projected $96.7 million and noted gross margins had fallen to 17.5 percent and operating margins 5.6 percent, net margins were down 260 basis points to 3.6 percent compared to 2011,  according to Motley Fool.

Retail net revenue increased 4 percent to $54.1 million for the 13 weeks ended April 1, 2012, from $52.1 million for the corresponding period last year. The increase was driven by a 5 percent rise in sales of beverages and pastries and, to a lesser extent, an increase in whole-bean and related sales. The company opened one store in the quarter, ending the quarter with 197 stores.

"We knew the first half of 2012 would be challenging for us," said Patrick O'Dea, president and CEO of Peet's Coffee & Tea, Inc. in a prepared statement. "In the first quarter we faced the highest coffee cost inflation of the year, and while our results reflect it, they were in line with our expectations. As we previously indicated, we expect to gain significant momentum in the second half as coffee cost inflation abates, and we remain excited about the strategic growth initiatives we're investing in this year."

Specialty net revenue increased 12 percent to $40.7 million for the 13 weeks ended April 1, 2012, compared to $36.4 million for the corresponding period last year. Within specialty, grocery sales were up 12 percent compared to the corresponding period last year, foodservice and office sales grew 16 percent, and home delivery sales were flat.

Cost of sales and related occupancy expenses increased as a percent of total net revenue to 51.0 percent for the quarter, compared to 46.6 percent for the corresponding period last year. The increase was caused by higher green coffee cost, which was 44 percent more expensive per pound than the same quarter last year. This increase was partially offset by price increases across all channels and lower shipping expenses.

Operating expenses were 31.5 percent of net revenue, consistent with the corresponding period last year. A favorable mix shift towards the specialty business and the impact of price increases across all channels were offset by higher payment card processing fees and investments in overhead.
General and administrative expenses increased as a percent of net revenue to 7.8 percent, compared to 7.7 percent for the corresponding period last year. General and administrative expenses increased to $7.4 million from $6.8 million for the corresponding period last year, primarily due to higher payroll-related and marketing expenses.

Looking ahead, Peet's confirmed the following fiscal 2012 guidance: Total net revenue growth of around 10 percent with diluted earnings per share in the range of $1.70 to $1.80.

Source: Peet's Coffee & Tea and Motley Fool.

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