Zacks_Analysts' Blog : Caribou Coffee Beats by a Penny - Analyst Blog

Caribou Coffee Company Inc. (CBOU), the second largest company-owned premium coffeehouse operator in the United States, posted third quarter 2010 earnings of 8 cents per share, beating the Zacks Consensus Estimate by a penny. The third quarter earnings also surpassed the year-ago quarter’s 3 cents. The better-than expected results were driven by double-digit growth in top line and higher margin.

Caribou Coffee’s net sales in the reported quarter climbed 11.8% to $70.2 million and also outperformed the Zacks Consensus Estimate of $67.0 million.

The top line was driven by a strong growth across all the three lines of business. Coffeehouse sales rose 3.9% year over year to $56.6 million, as comparable-store sales jumped 4.4%, resulting from a higher traffic and rise in average guest check.

Commercial sales leaped 71.6% to $11.3 million, driven by sales of $2.0 million of raw coffee beans at 13-year high price as well as by sales growth in consumer packaged goods business. Franchise revenues spiked up 34.6% to $2.3 million.

Cost of sales and related occupancy cost escalated 17.4% to $32.7 million, driven by sales increase in the quarter, whereas general and administrative expense increased 17.6% to $7.4 million. Moreover, operating expense upped 2.9% to $25.1 million as Caribou Coffee continues to invest in product and marketing initiatives to drive traffic.

 

Total operating income soared to $2.6 million from $0.7 million in the year-ago quarter and operating margins were up 150 basis points (bps) to 2.6% as operating cost based on revenues dropped 310 bps due to operating efficiencies. Additionally, depreciation and amortization expenses also declined 110 bps to 4.4% as capital spending was lower than the year-ago quarter.

Store Update

Based in Minneapolis, Minnesota, Caribou Coffee opened 6 franchised coffeehouses and closed 5 franchised and 1 company-owned coffeehouses.

Thus, at the end of the quarter, Caribou Coffee operated 410 company-owned coffeehouses and 129 franchised and licensed locations.

Financial Position

Caribou Coffee ended the quarter with cash and cash equivalents of $10.0 million, and shareholders equity of $57.1 million.

Our Take

We expect estimates to go up in the coming days, as the company provided better-than-expected results and also increased the top line by driving higher traffic.

One of Caribou Coffee’s primary competitors, Cheesecake Factory Inc.(CAKE) has reported third quarter 2010 earnings of 37 cents a share, which surpassed the Zacks Consensus Estimate of 34 cents. The better-than-expected results were driven by comparable-store sales growth, higher traffic and effective cost management.