CEO leaves a sagging Caribou

  • Article by: MATT MCKINNEY , Star Tribune
  • Updated: November 12, 2007 - 8:37 PM

The specialty coffee firm saw growth under Michael Coles, but profits didn't follow. COO Rosalyn Mallet will be the interim CEO.

Michael Coles

Michael Coles (December 2003)

Photo: Glen Stubbe, Star Tribune

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The man who survived personal disaster to become the head of Caribou Coffee Co. Inc. stepped down from the job Monday, his tenure marked by a two-year slide in the company's stock price.

Michael Coles, 60, oversaw the company's expansion from about 207 stores to 473 in his nearly five years on the job. The company began trading in 2005 at $15.51 a share but has since lost two-thirds of its value, closing Monday at $5.15.

President and COO Rosalyn Mallet will take over as interim CEO and board member Gary Graves was named nonexecutive chairman of the board. Coles, formerly president, CEO and chairman of the board, will remain a board member, the company said.

The company didn't respond Monday to questions about the switch. A conference call with stock analysts was planned for this morning.

Coles spent the past few years commuting to Caribou's Brooklyn Center headquarters from his home in Atlanta. He said in a prepared statement it was "time to step aside and let a new CEO take the company through its next phase of growth."

Coles, who survived a life-threatening motorcycle crash in 1977, went on to build the Great American Cookie Company from scratch before selling it for millions in 1998. He sometimes speaks at motivational conferences about surviving adversity.

Coles came to Caribou in 2003. He grew the chain from 200 stores to nearly 500 while pushing sales through new partnerships with grocery chains, big-box stores and some club stores.

Caribou also extended its brand during his tenure with coffee-flavored breakfast bars made by General Mills, coffee-flavored ice cream from Kemps and this year the pilot launch of a coffee-flavored ice drink made by Coca-Cola.

However, profits haven't followed. For this year, the average analyst estimate calls for Caribou to lose $1.01 per share, while in 2008 the company is projected to lose 63 cents per share. While market leader Starbucks has an operating margin of 10 percent, Caribou's is now negative 4 percent.

"There was a lot of top-line related expansion that came under his leadership, but the market is still waiting to see the profitability from that," said David Tarantino, an analyst at Robert W. Baird & Co.

This year saw the closing of at least 25 underperforming stores and moves toward more licensing and franchising. Those steps, though positive, came too slowly, Tarantino said.

"We've been a little cautious on the stock due to the slowness at which Caribou was addressing some of their profitability issues," he said.

Mallet, the new interim CEO, joined Caribou this year. She has 30 years of experience at food and hospitality companies, including a previous job as senior vice president for Carlson Companies.

Caribou was founded in 1992 by John and Kim Puckett. The couple sold the company in 2001 to Crescent Capital Investments, a private equity firm based in Atlanta. Caribou is the nation's second-largest specialty coffee company behind Starbucks, employing more than 5,000 people in 18 states and the District of Columbia.

Matt McKinney • 612-673-7329

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Michael Coles