Caribou Coffee Company, Inc. (CBOU) posted first quarter 2011 adjusted earnings of 8 cents per share, which beat the Zacks Consensus Estimate of 5 cents and the year-ago quarter earnings of 3 cents per share.
The company’s net sales during the quarter increased 7.8% to $72.3 million, aided by improved performance across all its business lines.
Performance Highlights
Segment wise, Coffeehouse sales spiked 3.6% year over year to $57.6 million during the quarter; as comparable coffeehouse sales jumped 4.3%. Commercial sales leaped 29.7% to $11.7 million, driven by higher sales to existing and new customers, while revenues from Franchise rose 21.9% to $2.5 million due to higher product sales and royalties.
Cost of sales and related occupancy cost jumped 5.9% to $36.4 million in the first quarter of 2011, driven by higher sales in the quarter; while operating expense rose 1.8% to $25.4 million attributable to the upside in variable cost. General and administrative expense also shot up 19.9% to $7.8 million due to the addition of some key managers in the second half of 2010. However, depreciation and amortization expenses declined 6.5% to $2.9 million due to less depreciable assets.
Total operating income surged more than double to $2.9 million and operating margin was up 250 basis points (bps) to 4.0% as total expense based on revenue dropped 250 bps due to operating efficiencies.
Store Update
During the quarter, Caribou Coffee opened 9 and closed 5 franchised coffeehouses. The company also closed one company-owned coffeehouse. At the end of the quarter, the company had 409 company-owned and 135 franchised coffeehouses.
Financial Position
Caribou Coffee ended the first quarter with cash and cash equivalents of $25.1 million and shareholders’ equity of $87.1 million.
Outlook
The Minneapolis, Minnesota-based company expects net sales growth of 7% to 9% and adjusted earnings in the range of 35 cents to 37 cents.
Our Take
We expect estimates to increase for fiscal 2011 and 2012 as the company witnessed growth across all the three segments and Caribou Coffee continues to make efforts to enhance shareholder value. The Zacks Consensus Estimates for 2011 and 2012 are pegged at 37 cents and 47 cents, respectively.
One of Caribou Coffee Company’s primary competitors, Cracker Barrel Old Country Store, Inc. (CBRL), will announce its first quarter results on May 24.
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