Caribou Coffee Company Inc.
(
CBOU
) remains geared up to expand its presence in one of its key
markets, Chicago, with its newest coffeehouse location in the
Oakbrook Terrace Square shopping center. The latest opening is
consistent with the company's strategy to consolidate its position
in its existing markets before venturing into the new ones.
Located in Oak Brook, Illinois, Terrace Square shopping center is
one of the largest open-air shopping malls in the United States,
housing several retail and restaurant giants. Management believes
that with the ongoing fall season, the new location will likely
post good business.
However, with the presence of restaurateurs like
Starbucks Corp.
(
SBUX
),
The Cheesecake Factory Inc.
(
CAKE
), California Pizza Kitchen, Subway along with many others in
Oakbrook Center, Caribou Coffee should be wary of competition too.
Caribou's intent to grow in the Chicago market can also be affirmed
from its recent partnership with Chicago's grocery giant
Jewel-Osco. As per the alliance, Caribou will unveil seven new
coffeehouses in Jewel-Osco stores within 2013. Presently, there are
more than 55 Caribou coffeehouses in the Chicago area.
The promising restaurant industry in Illinois, in which Chicago is
the largest city and third largest in the U.S., acts as a major
economic growth driver. According to National Restaurant
Association, total revenue from the restaurant sector in Illinois
is projected to be around $20.7 billion in 2012. Further,
management commented that Chicago has excess capacity for
expansion.
As of April 1, 2012, Caribou Coffee owns and operates 585
coffeehouses, including 174 franchised locations in 21 states, the
District of Columbia and nine international markets. The company is
expanding further in the international market.
We believe that Caribou Coffee remains well-positioned to sustain
its growth momentum while generating improved earnings on the heels
of innovative offerings. Apart from its variety in coffee, the
company is trying several menu options to strengthen its foothold
in the market.
Caribou Coffee currently carries a Zacks #3 Rank that translates
into a short-term Hold rating. We are maintaining our long-term
Neutral recommendation on the stock.
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