02.13.09 

peet: Q4:08 FINANCIAL RESULTS IN LINE, LOWERING FY:09 REVENUE BUT INCREASING EPS - MAINTAINING HOLD RATING
Peet's Q4:08 financial report was essentially in line with what we expected, although earnings was a penny better that what we had forecasted at $0.29 per diluted share on slightly better margins. The company appears to weathering the slowdown in consumer spending nicely, while leveraging its past investments in infrastructure to control expenses and improve overall business efficiency in its retail and specialty channels. For the upcoming year, management lowered their previous guidance, but essentially maintained their prior diluted EPS range. We have made some modifications to our estimates for this year that include lower sales, but better earnings on higher margins and lower operating expenses. We are maintaining or Hold rating on PEET shares, based on a 22x P/E multiple off our $0.99 FY:09 estimate. Contact Us for Full Report - PDF

10.29.08 

peet: Q3:08 FINANCIAL RESULTS AND GUIDANCE REFLECT CAUTIOUS EXPANSION - MOVING TO HOLD
Peet's reported fiscal Q3 results yesterday that were behind our revenue and earnings estimates and the consensus numbers. The shortfall was principally due to lower-than-expected grocer expansion and sales per retail store. Management attributed the lower results to delays in new grocer distribution and a subsequent shift in grocer promotional activity. For the balance of the year, the company reiterated EPS guidance of $0.77 to $0.82. However, the full year earnings guidance reflects lower revenue than assumed in our prior estimates and the consensus forecast, but better margins on lower operating costs. Finally, management provided initial guidance for FY:09 that includes revenue growth of 12% to 15%, diluted earnings of $0.94 to $1.00 per share, grocer expansion of about 1,000 new stores, and 10 new retail locations. Overall, we believe the guidance for the balance of this year and for FY:09 reflects a cautious approach to new business expansion given the overall state of the economy, particularly with regard to the retail channel. We think that management's strategic change is prudent with consumer spending not likely to improve over the near term. A significant shift in capital spending from retail store expansion toward the Specialty business, and an overall slowdown in growth also potentially offers overall better operating margins. Nevertheless, the slowdown in expansion results in lower revenue and earnings than we had anticipated going into the release. As a result, we have lowered our FY:08 revenue and diluted earnings estimate to $284.9 million (down from $291.0 million) and $0.79 per share (down from $0.80). More important, for next year we are now modeling total sales of $326.2 million versus $342.8 million previously, and earnings of $0.96 per share, down from $0.97. We are also moving Peet's shares to a Hold rating with a price target of $21 (down from $26). While we see little upside to shares near term, we believe Peet's should hold its value reasonably well in an overall down equity market. Contact Us for Full Report - PDF

08.01.08 

peet: SOLID Q2:08, RAISING FISCAL 2009 EPS FORECAST TO $0.80
Peet's reported strong fiscal Q2 results that were largely in line on the revenue line, but well above our earnings forecast and the consensus Street estimate of $0.15 per diluted share. Solid improvement in gross margins across business channels and controlled operating expenses were primarily responsible for the higher earnings, despite continued rising commodity costs and higher shipping expenses. Sales continued to benefit from strong grocer expansion and increased shelf space at existing grocery accounts, as 27% y/y revenue growth in the channel more than offset modest comp store sales and lower-than-expected new store builds in the retail channel. Looking ahead, we modeled only modest changes to our revenue forecast for FY:08, but made several adjustments to our margin and profit assumptions over 2H:08. Overall, we are now forecasting revenue of $291.03MM (down from $291.52MM) and fully diluted EPS of $0.80 (up from $0.79). While we expect increased operating expenses over the next two quarters and a continued challenging market for the Retail channel, we think Peet's business should benefit from strong management controls and a healthy grocer business. Our prior valuation estimate of $27 to $28 per share has been lowered to $26, reflecting slower expectations for retail expansion and continued high commodity and shipping costs in FY:09. Contact Us for Full Report - PDF

05.02.08 

peet: FQ1:08 ENCOURAGING DESPITE SOFTER RETAIL SALES GROWTH
Peet's reported FQ1:08 financial results yesterday after the market close that included revenue of $67.1 million and EPS of $0.15, which was below our sales estimate of $68.1 million and the Street consensus forecast $67.7 million, but in line with our earnings forecast of $0.15 per share (Street consensus at $0.15). A gross margin of 52.4% came in slightly ahead of our forecast of 52.2%, based on higher grocer sales relative to retail sales, while FQ1:08 operating margin was 20 basis points (bps) below our estimate of 4.6% due to the lower sales number. Metrics were essentially in line with what we were expecting going into the release, with 1,100 new grocery accounts added in the quarter (below our 1,200 estimate) and nine new stores (above eight store forecast). The Company remains on track to reach 8,000 grocers and 25-30 new retail stores by the end of this year. Consequently, we have made no changes to our year-end forecast of 8,000 grocers and 27 new stores. In addition, management maintained prior revenue guidance of 17% to 20% y/y growth ($291.7 million to $299.3 million) and EPS of $0.77 to $0.82 although management appears to be leaning toward the lower end of its estimates. We are adjusting some of our segment revenue forecasts for FY:08 although our overall sales estimate for the year remains unchanged at $291.5 million. Our model includes slightly lower retail sales for the year, offset by higher grocer and higher foodservice sales. Our EPS estimate for the year falls by a penny to $0.79. Overall, we were satisfied with the results in the quarter, particularly given the dismal release from Starbuck's (SBUX: Not Covered) and the overall negative sentiment in the consumer space. While retail revenue tracked below our forecast and costs are running slightly ahead of what we previously modeled, we continue to believe that Peet's shares should perform well over the course of the year. Our valuation estimate of $27 to $28 per share remains unchanged. Contact Us for Full Report - PDF

04.15.08 

peet: A MORNING COFFEE WITH MANAGEMENT
We had an opportunity last week to meet with management at the Company's roasting facility in Alameda, California. We came from that meeting with some new observations and an appreciation for the logistics that goes into producing fresh, artisan coffee on a daily basis. Our overall fundamental view of Peet's continues to remain positive based on the Company's growing presence in specialty coffee and our forecast for FY:08. Contact Us for Full Report - PDF

03.25.08 

peet: Initiating Coverage
We are initiating coverage of Peet's Coffee & Tea, Inc., which currently trades at 29.3x our CY:08 EPS estimate and 22.7x our CY:09 estimate. According to our analysis, Company shares are trading at a discount to the average historical NTM P/E and EV to sales, relative to forward growth. Fundamentally, we believe that the Company is well-positioned to benefit from strong demand in the U.S. for specialty coffee and coffee houses based on its premium brand and disciplined growth. In addition, we expect improving operating and EBITDA over the back half of FY:08 and in FY:09 Contact Us for Full Report - PDF