Peet's Continues Upward Jolt
By Jenny Lim
STANFORD, April 27 - Peet's Coffee cup runneth nearly eight percent over.
The Emeryville-based coffee franchise reported a 7.8 percent increase in quarterly profit for its fiscal fourth quarter that ended Jan. 1, 2006. The company's net income climbed to $3.4 million, or $.24 per diluted share, from $3.2 million, or $.23 per diluted share for the same quarter of fiscal 2004.
Peet's fourth quarter earnings report, released Feb. 16, also indicated sales increased 12.3 percent compared to the same period a year ago. The java business' net revenue hit $50.6 million, up from $45.1 million during the parallel quarter of 2004.
Year end, the company's net revenue for fiscal 2005 rose 20.3 percent to $175.2 million from $145.7 million for the 53-week fiscal 2004. Net earnings increased 21.7 percent to $10.7 million, or $.74 per diluted share, for the year, compared to $8.8 million, or $.63 per diluted share, during the fourth quarter of fiscal 2004.
The company said its sales growth is the highest it's been during Peet's 40-year history. Founded in Berkeley, California in 1966, Peet's Coffee and Tea, Inc. became a public company in 2001.
"Our results for 2005 were right on track with our stated goals at the start of the year, with sales growth of 22.5 percent, a bit higher than expected, and both earnings per share and operating income were right on target," Patrick O'Dea, President and Chief Executive Officer of Peet's, said in a statement.
During a webcast of the conference call announcing the fourth quarter financial results, O'Dea attributed the quarterly increase in revenue to strong holiday sales, new store openings and a rise in grocery, office and home delivery business.
Peet's Holiday Blend coffee sales went up 31 percent company-wide, O'Dea said. The winter holiday campaign also drove up sales of Peet's gift cards. The company sold $2.8 million in Peet's cards in the last 13 weeks of 2005, compared with $2 million in the same quarter of 2004.
O'Dea said Peet's revenues from grocery, home and office sales grew 23 percent during the quarter. Home delivery sales shot up from 11 percent to 14 percent compared to the same quarter of 2004, thanks in part to new Web merchandising and free holiday shipping. Peet's e-mail database expanded 54 percent in the last year, O'Dea said.
Grocery sales of Peet's coffee went up by $7.8 million in fiscal 2005, O'Dea and Chief Financial Officer Tom Cawley said during the conference call. According to the company's annual report, specialty sales - grocery sales and sales to restaurants and food companies - increased 26.4 percent, compared to 28.3 percent during the fourth quarter 2004. The company's grocery network includes "virtually all the grocery stores west of the Rockies," according to the company. During the conference call, O'Dea and Cawley said most of the growth in grocery sales has come from existing accounts, not the addition of new ones. King Soopers, the popular Colorado grocery chain, is Peet's newest account with a large grocery store chain.
Peet's opened seven new retail locations during the quarter, bringing the total number of retail locations opened during fiscal 2005 to 20, a record number of annual openings for the company. All but two of the new Peet's were opened in California.
Peet's now has 113 retail stores in California, Chicago, Boston, Portland, Seattle and Denver. The company is set to open stores this year in Castro Valley, Redondo Beach and Rose Garden, California, according to the Peet's Web site.
O'Dea and Cawley said the company plans to open another 23 to 28 locations in fiscal 2006. Most openings would take place during the second through fourth quarters, and roughly 75 percent of those openings would be in California, the Peet's executives said. The company expects to spend $11 to $13 million on the new retail locations this year and on expenditures for new stores in progress in 2007.
Peet's CEO and CFO expect the company to post 20 to 23 percent sales growth in 2006.
O'Dea confirmed Peet's will purchase a new roasting plant in Alameda, California in 2006. The $24 million facility will include roughly 460,000 square feet of land and a 135,000 square foot building. The facility is under construction and should be finished by December 2006 or the first quarter of 2007. The new roasting facility is designed to process coffee for up to 500 retail stores.
During the teleconference, O'Dea also credited "The Oprah Winfrey Show" as bringing national recognition to the Peet's brand. In February, the popular talk show host named Peet's French Roast as one of her favorite morning treats during her first "Breakfast with Oprah" show. "Peet's is for serious coffee drinkers," Winfrey said, according to the show's Web site.
Contact Jenny Lim at jennylim@stanford.edu
