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Caribou Coffee: Single-serve Slowdown

05 May Posted by in Coffee News | Comments

 

May 4, 2012

Caribou Coffee’s stock sank 15 percent Thursday as the company got whacked by a surprisingly large slowdown in the promising single-serve coffee market.

Business partner Green Mountain Coffee Roasters Inc., which makes single-serve Keurig coffee machines, reported results Wednesday that fell well short of forecasts. Then Caribou said Thursday that it expected its net sales in 2012 to grow 6 to 8 percent, not approximately 10 percent as previously forecast.

While the bulk of Caribou’s sales come from its namesake coffeehouses, the Brooklyn Center-based company has a fast-growing business providing coffee for Keurig machines.

“I think they are being conservative, and they should be,” said Mark Argento, a stock analyst with Craig- Hallum Capital Group.

Caribou’s stock has been hot in the past year, rising 78 percent before Thursday’s decline. Shares closed at $13.99, down $2.50.

The revised outlook was released with its quarterly earnings after the market closed Thursday. In after-hours trading, Caribou shares were around $13 a share.

Caribou’s revised outlook came after Green Mountain shocked Wall Street with an ugly financial report late Wednesday. Its quarterly revenue of $885 million was almost $100 million below analysts’ estimates, and the company scaled back its sales and profit outlook.

Green Mountain’s stock lost almost half of its value Thursday, falling $23.65 to close at $25.87. Several other coffee stocks fell at least partly in reaction. Caribou, which has had a partnership with Green Mountain since 2007, got hit particularly hard.

In a conference call, Caribou Coffee Co. Inc. Chief Executive Michael Tattersfield told analysts that despite the Keurig slowdown, “We continue to believe our partnership with Green Mountain provides us with a strong platform as we grow our Caribou brand.”

Caribou sells green coffee beans to Green Mountain, which roasts them to Caribou’s specifications and then markets a Caribou-branded single-serve product. Caribou gets a royalty on those sales.

About 22 percent or $17.5 million of Caribou’s first-quarter sales came from its commercial segment, which includes its Keurig business and whole-bean sales through stores and food services.

Both businesses have been booming, and Caribou’s overall commercial segment chalked up a 50 percent increase in sales during the first quarter compared with a year ago. Caribou’s retail coffeehouse sales were $59.7 million, up 3.7 percent from a year ago.

Caribou posted net earnings for the quarter of $1.2 million, or 6 cents per share, down from $24.1 million, or $1.17, a year ago. However, 2011’s first-quarter earnings included a $21.3 million tax benefit. Caribou’s first-quarter revenue was $80.5 million, up 11.4 percent.

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