Zacks_Analysts' Blog : Einstein Noah Buys Kettleman Bagel - Analyst Blog

Einstein Noah Restaurant Group Inc. (BAGL), the owner, operator, franchisor, and licensor of bagel specialty restaurants in the United States, has announced the purchase of local bagel chain Kettleman Bagel Company, founded in Portland Oregon in 2006. This initiative was taken in order to boost its position in the Pacific Northwest market. The financial terms of the deal were not disclosed.

Kettleman presently has five stores in Portland. Going forward, Lakewood, Colorado-based company Einstein Noah intends to bring all Kettleman stores under one of its brands including Einstein Bros., Noah's New York bagel and Manhattan bagel.

The acquisition is in line with the company’s growth strategy and we believe the deal will strengthen its position in Portland. Portland, the third most populous city in the Pacific Northwest,ensures huge growth opportunity in the market. 

The bagel giant’s sales-driven initiatives such as the introduction of products and promotion of premium products will also succeed in driving traffic. At present, the quick casual leader has seven Noah’s restaurant in the Portland metro area.

Einstein Noah remains focused on unit growth and foresees considerable opportunity within licensed and franchise business, as well as expansion of corporate footprint.In fiscal 2011, the company plans to open 60 to 65 restaurants. At the end of the third quarter, the company had 758 restaurants, out of which 431 were company owned, 94 were franchised and 233 were licensed.

Most of the company’s peers, such as Starbucks Corporation (SBUX) and Yum! Brands Inc. (YUM), are also expanding through acquisition.

Einstein Noah’s currently retains a Zacks #3 Rank (short-term Hold rating). We are also maintaining our long-term Neutral recommendation on the stock.