Teavana Signs Middle East Expansion Deal


Teavana Holdings has signed a 10-year franchise agreement to expand the business throughout the Middle East and leased its first Canadian location in Edmonton.

The move follows stellar second quarter financials and year-to-date sales of $66.3 million up from $48.8 million in the comparable Maythrough July period in fiscal 2010.

Net income increased 78% during the latest quarter on a 36% increase in sales to $31.3 million, according to the company which opened 18 new stores this spring and 51 in the past 12 months.

In a conference call last week Chairman and CEO Andrew Mack said he is "incredibly excited" about Teavana's growth.

"We're establishing such a strong base on which we can build," he said. He estimated the company would generate $160 to $164 million and net $16 to $16.8 million in the current fiscal year. The company grossed $127 last year.

"We are pleased to report a strong second quarter in both revenue and profitability. We successfully opened 18 new stores in the second quarter and have opened 33 new stores this year towards our goal of 50 new stores in fiscal 2011, while continuing to deliver solid same store sales growth,” Mack told investors. “We are focused on expanding our store base, driving comparable store sales growth, growing our e-commerce business and selectively pursuing international expansion, while ensuring that we meet our profitability objectives and make the required investments to position our company to achieve our longer-term goals."

The franchise deal with Alshaya group, known for developing the Starbucks Corp, Pottery Barn and American Eagle Outfitters chains in the Middle East, means new stores in Bahrain, Kuwait, Saudi Arabia, Qatar, United Arab Emirates, Egypt, Lebanon and Jordan.

Separately, Teavana leased space in the Edmonton Mall where it will open its first Canadian shop. In addition to the 179 company-owned stores there are currently 13 Teavana franchised shops in Mexico.

"The multi-year franchise agreement with Alshaya marks an important milestone on the road to international expansion for Teavana. We believe the combination of our unique "Heaven of Tea" retail experience and our offering of the best tea and tea-related merchandise from around the world makes our concept attractive and distinctive both within the U.S. and internationally. We are pleased that our seasoned partner, Alshaya, recognizes the strong potential for the Teavana brand and retail experience in the Middle East, and we look forward to building our presence in the region," said Mack.

“Extending Teavana’s reach beyond the US and Mexico is a key pillar of our overall growth strategy,” said Mack, a former Applebee’s manager who founded the Atlanta-based company in 1997.

Comparable store sales, including e-commerce, increased by 9%, an indication that company efforts to increase online sales are succeeding. Comparable store sales, excluding e-commerce, increased by 6.4% during the period and all of the company-owned stores are profitable on an annualized basis, Mack said. The average amount that customers are spending at Teavana has risen 11 percent.