Peet's Coffee & Tea, Inc. announced its third quarter 2011 results for the period ended October 2, 2011, which included 13 weeks.
For the 13 weeks ended Oct. 2, 2011, net revenue increased 14 percent to $91.2 million from $80.2 million for the corresponding period of 2010.
Net income for the quarter was $1.5 million, or $0.11 per diluted share, compared to $3.8 million, or $0.28 per diluted share, for the corresponding period last year. Net income for the quarter includes the anticipated settlement and legal costs of a class action lawsuit ($2.2 million after tax). Excluding this item, non-GAAP diluted earnings per share would have been $0.28, equal to the third quarter of 2010.
"Our third quarter business performance was right on track with our plan for the year," said Patrick O'Dea, CEO and president of Peet's Coffee & Tea in a prepared statement. "Our sales growth accelerated to 14 percent driven by strong grocery growth of 38 percent, and we weathered significantly higher coffee costs. We're on target to finish the full year consistent with our previous non-GAAP guidance. Looking forward to 2012, we have existing plans in place to deliver strong sales and earnings growth, while continuing to invest in and explore additional growth initiatives."
Retail net revenue increased 5 percent to $52.3 million for the 13 weeks ended Oct. 2, 2011, from $49.8 million for the corresponding period last year. The increase was driven by a 7 percent increase in sales of beverages and pastries. The company opened one store in the quarter, ending the quarter with 194 stores versus 193 stores at the end of the third quarter 2010.
Specialty net revenue increased 28 percent to $38.9 million compared to $30.4 million for the corresponding period last year. Within the specialty business, grocery sales grew 38 percent, the foodservice and office business was up 18 percent, and home delivery sales were up 3 percent compared to the same period last year.
Cost of sales and related occupancy costs increased as a percentage of net revenue to 51.6 percent, compared to 47.5 percent 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 31.3 percent, compared to 33.1 percent for the corresponding period last year. The decrease was due primarily to a favorable mix shift to the specialty business, the impact of price increases across all channels, leveraging of overhead costs, and continued effective cost management in retail stores.
Litigation related expenses of $3.2 million include all costs incurred related to the pending settlement of a class action lawsuit that was filed in February 2010 against the company.
General and administrative expenses as a percentage of net revenue were 6.9 percent, compared to 7.2 percent for the corresponding period last year. General and administrative expenses increased to $6.3 million from $5.8 million for the corresponding period last year, primarily due to higher marketing spend.
Depreciation and amortization expenses as a percentage of net revenue decreased to 4.2\ percent, compared to 4.9 percent for the corresponding period last year. Depreciation and amortization expenses were $3.9 million, consistent with last year.
The company ended the quarter with cash and cash equivalents plus investments of $12 million, compared to $49 million at year end 2010.
The company provided the following full-year guidance for 2011:
• Confirms full-year net revenue growth expected to be in the 10 percent to 12 percent range;
• Expects full-year GAAP diluted earnings per share to be toward the higher end of the $1.27 to $1.34 range. This guidance includes the anticipated settlement and legal costs of a class action lawsuit equating to $0.16 diluted earnings per share;
• Confirms full-year non-GAAP diluted earnings per share expected to be toward the higher end of the previous guidance range of $1.43 to $1.50.
Looking ahead, Peet's provided the following fiscal 2012 guidance:
• Total net revenue growth of around 10 percent;
• Diluted earnings per share in the range of $1.70 to $1.80.