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Peet's Coffee & Tea Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: August 9, 2012 05:23PM
Peet's Coffee & Tea Inc. (PEET) filed Quarterly Report for the period ended 2012-07-01. Peet's Coffee & Tea, Inc. has a market cap of $989.9 million; its shares were traded at around $74.51 with a P/E ratio of 59.8 and P/S ratio of 2.7. Peet's Coffee & Tea, Inc. had an annual average earning growth of 15.7% over the past 10 years. GuruFocus rated Peet's Coffee & Tea, Inc. the business predictability rank of 4-star.
Highlight of Business Operations:In the past two years, we have experienced a dramatic increase in the price volatility of Arabica coffee traded on New York Board of Trade. Since May 2010, commodity coffee prices have been extremely volatile ranging from a low of $1.32 per pound to a high of $3.05 per pound and as of June 29, 2012 was $1.70 per pound. We expect the coffee commodity market to continue to be challenging over time as the market continues to be influenced by worldwide supply and demand, the relative strength of the dollar, speculative trading and weather. While we do not purchase coffee on the commodity markets, price movements in the commodity trading of Arabica coffee beans impact the prices we pay. The price that we paid for our coffee for the first half of 2012 was 28% higher per pound than what we paid in the corresponding period of 2011 and that increased cost negatively affected our profitability. In order to have visibility to our costs for the future, we typically fix the price of our coffee needs for the next 6 to 12 months by purchasing and holding large inventories of green coffee and utilizing future fixed price purchase commitments. As of July 1, 2012, our inventory and fixed price commitments are sufficient for virtually all of our anticipated 2012 needs at a cost approximately 10% higher per pound than 2011.
Operating expenses consist of both retail and specialty segment operating costs, such as employee labor and benefits, sales commissions, repairs and maintenance, supplies, training, travel, banking and payment card processing fees. Operating expenses as a percentage of net revenue for the first half of 2012 remained the same at 31.3% compared to the first half of 2011. The impact of price increases and the revenue mix shift from the retail segment towards the specialty segment, which has lower operating costs, were offset by investments in overhead expenses and higher payment card processing fees.
Stocks Discussed: PEET,