Peets Coffee & Tea, Inc. (MM) (NASDAQ:PEET)
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EMERYVILLE, Calif., Nov. 2 /PRNewswire-FirstCall/ -- Peet's Coffee & Tea, Inc. (NASDAQ:PEET) today announced its third quarter results for the period ended October 2, 2005, which included 13 weeks.
In this release, the company:
-- Reports net revenue growth for the quarter of 24.3 percent, slightly
higher than previous guidance of 20 to 21 percent;
-- Achieves earnings per share of $0.15, at the high end of previous
guidance of $0.14 to $0.15;
-- Raises full year 2005 net revenue guidance to 22 percent growth or
about $175 million and confirms $0.74 in earnings per share; and
-- Provides 2006 guidance of 20 to 23 percent sales growth and operating
margins in the 9 percent range.
For the quarter ended October 2, 2005, net revenue increased 24.3 percent to $42.9 million from $34.5 million for the corresponding period of fiscal 2004.
For the quarter, net earnings increased 10.3 percent to $2.2 million from $2.0 million for the corresponding period last year. Earnings per share were $0.15 compared to $0.14 per share for the same period last year. Last year in the third quarter, net earnings included a $0.5 million increase in income as a result of an adjustment to a 2003 lawsuit settlement reserve, which increased earnings per share by $.02.
"We are pleased with the progress we are making in executing our growth strategy, as indicated by our results this quarter," said Patrick O'Dea, President and CEO of Peet's Coffee & Tea, Inc. "Our retail and specialty businesses both performed well, and we are on track to open 20 new Peet's stores this year."
Financial and Operating Summary
Retail revenue increased 20.1 percent to $28.7 million for the quarter ended October 2, 2005, from $23.9 million for the corresponding period of fiscal 2004. The increase was primarily attributable to new retail stores opened in the last 12 months and secondarily to growth in existing stores. The company opened 5 stores in the quarter.
Specialty revenue increased 34.0 percent to $14.1 million, compared to $10.5 million last year. Within specialty sales, the grocery business continues to grow the most rapidly, up 53.2 percent over last year, with existing grocery customers accounting for the majority of the increase. The food service business also grew significantly at 35.6 percent, followed by the office business at 33.4 percent, both benefiting from new customers added in the last 12 months. Home delivery sales grew 10.6 percent.
Cost of sales and related occupancy costs decreased to 45.9 percent of total net revenue compared to 46.8 percent last year. This decrease was primarily driven by a price increase taken in the retail and home delivery businesses in October of 2004.
Operating expenses as a percent of net revenue increased to 34.7 percent from last year's 34.5 percent. Retail operating expenses increased 1.8 percentage points as a percent of retail revenue due to investments in headcount and new store expansion, partially offset by the price increase. Specialty operating expenses decreased 1.6 percentage points as specialty sales grew on a relatively fixed cost structure.
Marketing and advertising expenses increased to $1.1 million, compared to $0.8 million last year. As a percent of total net revenue, marketing expenses increased to 2.6 percent from 2.2 percent last year.
Depreciation and amortization expenses increased to $1.9 million, compared to $1.5 million last year. The increase was primarily due to the opening of 18 new retail stores in the last 12 months. As a percent of total net revenue, depreciation and amortization expenses were equal to last year at 4.3 percent.
General and administrative expenses increased to $2.1 million compared to $1.2 million last year primarily due to the $0.5 million litigation reserve reduction in the third quarter of 2004. The remaining increase is due to costs associated to support the growth of the business. As a percent of total net revenue, general and administrative expenses increased to 5.0 percent from 3.5 percent last year due to the 1.6 percent impact of the litigation reserve reduction.
Income from operations increased to $3.2 million, or 7.5 percent of net revenue (or operating margin), compared to $3.0 million, or 8.6 percent, last year.
The company ended the quarter with cash and cash equivalents plus marketable securities of $65.4 million.
Fiscal 2005 Targets
Peet's also reaffirmed its earnings guidance for the full year 2005 and raised its sales guidance:
-- For the 13 weeks ending January 1, 2006, the company estimates sales to
be up between 12 to 13 percent compared to the 14 weeks ended January
2, 2005. On a 13 week to 13 week comparative basis, sales are expected
to grow approximately 19 to 20 percent. Earnings for the quarter are
expected to be approximately $0.24 per share.
-- For the full year, Peet's is forecasting total net revenue to grow
approximately 22 percent, excluding the impact of the 53rd week in
fiscal 2004, resulting in net revenue of approximately $175 million.
Operating margin is forecasted at slightly above 9 percent resulting in
expected earnings per share of $0.74. The company expects to open a
total of 20 new stores in the fiscal year.
Fiscal 2006 Outlook
Looking ahead, Peet's introduced the following fiscal 2006 guidance:
-- Total revenues are expected to grow 20 to 23 percent.
-- Excluding any impact from expensing stock options, operating margins
are expected to be approximately 9 percent, which would result in
earnings per share between $.80 and $.83 on a diluted share base of
approximately 15 million shares.
-- The company is planning to grow its retail store base by 20 to 25
percent, or 23 to 28 new locations.
-- Finally, the company is targeting an effective tax rate of slightly
less than 40 percent, with quarterly variations.
"Two years ago, we set a target to be a 20 percent plus top-line growth company on a sustainable basis," said Patrick O'Dea, President and Chief Executive Officer. "In 2005, we expect to achieve that target and we intend to continue it in 2006. As we've consistently indicated over the past two years, we expect operating margins to remain in the 9 percent range in 2006, though our bias is to invest further in top-line growth initiatives should the right opportunities arise. We remain focused on our vision to strengthen Peet's position as the gold standard specialty coffee and tea brand in the world and on executing against the enormous long-term growth opportunity before us."
Peet's Coffee & Tea, Inc. Q3 2005 Conference Call
The company will report its third quarter 2005 earnings results via conference call on Wednesday, November 2, 2005. The teleconference call will begin at 2 p.m. PT/5 p.m. ET. The teleconference can be accessed by calling 1-800-289-0494, using access code 6064330. The call will be simultaneously Webcast with accompanying slides on Peet's Web site at http://investor.peets.com/Medialist.cfm.
A replay of the teleconference will be available two hours after the end of the call through midnight ET on November 9, 2005, at 1-888-203-1112 or 719-457-0820, using access code 6064330. It will also be archived at http://investor.peets.com/Medialist.cfm through November 2, 2006.
ABOUT PEET'S COFFEE & TEA, INC.
Founded in Berkeley, Calif. in 1966, Peet's Coffee & Tea, Inc. is a specialty coffee roaster and marketer of fresh, deep-roasted whole bean coffee for home and office enjoyment. Peet's fresh-roasted coffee, hand-selected tea and related items are sold in several distribution channels including grocery, home delivery, office and food service accounts and company-owned stores throughout the United States. Peet's is committed to strategically growing its business and to maintaining a unique culture and focus on customer satisfaction. For information about Peet's Coffee & Tea, Inc., visit http://www.peets.com/ or call 1-800-999-2132. Peet's Coffee & Tea, Inc. shares are traded under the symbol PEET.
This press release contains statements that are not based on historical fact and are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward looking statements include statements relating to 2005 annual and fourth quarter sales growth, earnings estimates, and new store openings, and 2006 revenue, retail store growth, operating margin and tax rate targets. Forward-looking statements are based on management's beliefs as well as assumptions made by and information currently available to management, including financial and operational information and current competitive conditions. As a result, these statements are subject to various risks and uncertainties. The Company's actual results could differ materially from those set forth in forward-looking statements depending on a variety of factors including, but not limited to, the Company's ability to implement its business strategy, attract and retain customers, and obtain and expand its market presence in new geographic regions; the availability and cost of high quality Arabica coffee beans; consumers' tastes and preferences; and competition in its market as well as other risk factors as described more fully in the Company's filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended January 2, 2005. These factors may not be exhaustive. The Company operates in a continually changing business environment, and new risks emerge from time to time. Any forward-looking statements speak only as of the date of this press release.
PEET'S COFFEE & TEA, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited, in thousands, except per share amounts)
Thirteen weeks ended Thirty-nine weeks ended
October 2, September 26, October 2, September 26,
2005 2004 2005 2004
Retail stores $28,719 $23,917 $84,577 $70,063
Specialty sales 14,135 10,549 39,988 30,550
Net revenue 42,854 34,466 124,565 100,613
Operating expenses:
Cost of sales and
related occupancy
expenses 19,671 16,143 56,568 46,355
Operating expenses 14,868 11,903 42,731 34,260
Marketing and
advertising expenses 1,103 762 2,675 2,613
Depreciation and
amortization expenses 1,864 1,487 5,365 4,166
General and
administrative
expenses 2,122 1,221 6,432 4,724
Total operating costs
and expenses 39,628 31,516 113,771 92,118
Income from operations 3,226 2,950 10,794 8,495
Investment income, net 421 227 1,176 655
Income before income taxes 3,647 3,177 11,970 9,150
Income tax provision 1,431 1,168 4,723 3,557
Net income $2,216 $2,009 $7,247 $5,593
Net income per share:
Basic $0.16 $0.15 $0.53 $0.42
Diluted $0.15 $0.14 $0.50 $0.40
Shares used in
calculation of net
income per share:
Basic 13,949 13,420 13,754 13,269
Diluted 14,658 14,115 14,421 13,915
PEET'S COFFEE & TEA, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands, except share amounts)
October 2, January 2,
2005 2005
ASSETS
Current assets
Cash and cash equivalents $13,900 $11,356
Short-term marketable securities 49,750 --
Accounts receivable, net 4,928 4,136
Inventories 20,751 12,614
Deferred income taxes 1,434 1,403
Prepaid expenses and other 4,715 2,280
Total current assets 95,478 31,789
Long-term marketable securities 1,767 52,057
Property and equipment, net 44,996 40,588
Intangible and other assets, net 3,718 3,455
Total assets $145,959 $127,889
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $5,307 $5,710
Accrued compensation and benefits 6,116 4,266
Deferred revenue 2,259 2,394
Other accrued liabilities 2,673 3,372
Total current liabilities 16,355 15,742
Deferred income taxes 879 838
Deferred lease credits and other long-term
liabilities 2,401 2,182
Total liabilities 19,635 18,762
Shareholders' equity
Common stock, no par value; authorized
50,000,000 shares; issued and outstanding:
14,015,000 and 13,500,000 shares 102,979 93,091
Accumulated other comprehensive loss, net of tax (90) (152)
Retained earnings 23,435 16,188
Total shareholders' equity 126,324 109,127
Total liabilities and shareholders' equity $145,959 $127,889
DATASOURCE: Peet's Coffee & Tea, Inc.
CONTACT: Media: Kelly Krueger of Weber Shandwick, +1-415-248-3415 or
, for Peet's Coffee & Tea, Inc.; or Investors:
Maria Butler-Hadas of Peet's Coffee & Tea, Inc., +1-510-594-2196 or
Web site: http://www.peets.com/