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Caribou Coffee CEO Michael Tattersfield is facing weakness in his company’s sales through grocery stores and food services.

Richard Sennott, Star Tribune

Caribou profit dips but tops Wall Street estimates

  • Article by: MIKE HUGHLETT
  • Star Tribune
  • November 8, 2012 - 9:51 PM

Caribou Coffee Co. Inc. on Thursday reported a third-quarter downturn in profit and sales, but its performance still rose above Wall Street's expectations.

The Brooklyn Center-based company posted net income of $1.7 million, or 8 cents per share, down from $1.8 million, or 9 cents per share, a year ago. Analysts polled by Thomson Reuters were expecting per-share profits of 6 cents, on average.

Caribou's sales for the quarter were $77.2 million, down 5.2 percent from a year ago, though above analysts' estimates of $74.8 million.

"The third quarter was definitely better than expected on both revenue and earnings," said Sharon Zackfia, an analyst at William Blair.

Caribou said that after its third quarter ended, superstorm Sandy damaged a portion of the company's green-coffee inventory at a warehouse in New Jersey. The company is still assessing the damage but expects its liability will not exceed $5 million.

The damage will affect Caribou's 2012 earnings per share, but it's not clear yet how much, the company said. Still, the low end of Caribou's 2012 earnings guidance was upped a bit Thursday.

Caribou is the nation's second-largest coffeehouse chain after behemoth Starbucks, and its coffeehouse segment had a strong quarter. Sales were $61 million, up 4 percent over a year ago. Same-store sales, which adjust for new restaurant openings, rose 3.5 percent.

"We were very pleased that comparable coffeehouse sales were up 3.5 percent," Caribou CEO Michael Tattersfield said in a conference call with analysts. New teas and other cold beverages, coupled with a revamped bakery lineup, helped coffeehouse sales during the quarter, he said.

Zackfia said Caribou's coffeehouse sales were better than Wall Street expected, and were an improvement over the previous two quarters.

Caribou's second-biggest segment is commercial sales through grocery stores and food services, and it was a downer, as expected. For the quarter, commercial sales were $11.9 million, down 40 percent over a year ago.

The main culprit was continuing weakness in Caribou's single-serve coffee business for Keurig coffee machines -- so-called K-cups.

The K-cup business has been in trouble since the first quarter, following a slowdown at Green Mountain Coffee Roasters. Green Mountain makes Keurig machines, and Caribou does significant business with Green Mountain. Caribou's earnings were released after the stock market closed.

Mike Hughlett • 612-673-7003

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