Minneapolis, Minnesota-based
Caribou Coffee Company, Inc.
(
CBOU
) recently announced the opening of its 100
th
international location in Istanbul, Turkey. The new opening marks
the company's sixth store in Turkey and was opened in partnership
with its principal franchise Al Sayer Group and Turkey's Yildiz
Holding.
Al Sayer Group is the major franchisee of the US-based
company-owned premium coffeehouse operator, as it operates almost
90% of international outlets. Last year, Al Sayer Group and Yildiz
Holding entered into a joint venture to open Caribou coffeehouse in
Turkey.
The new store is located in Istanbul, the largest city in Turkey
and one of the world's largest cities by population within city
limits. Coffee is quite popular in Turkey as the people in the
country generally socialize over coffee and coffee houses are a
central place for meeting of cultured people and politicians. Thus,
given its strategic location, we believe this new store is on right
track to drive growth in the coming days.
Despite more business from the new units, Caribou coffeehouse
will face stiff competition in Turkey from
Starbucks Corporation Inc.
(
SBUX
) and Second Cup, which already boast of a strong presence in the
area.
Caribou coffeehouse currently owns and operates 585
coffeehouses, including 174 franchised locations, in 21 states, the
District of Columbia and nine international markets. The company
continues to drive growth through unit expansion and plans to open
55 to 70 locations in 2012 in both domestic and international
markets, implying an upside of 10% to 12%.
The company is expanding further in the international market and
intends to consolidate its position in its existing markets, before
entering into new markets. The company also remains focused on
growing its commercial business in the international markets after
increasing the commercial business significantly in the domestic
market. In the recently concluded first quarter 2012, the company's
sales from the commercial segment surged 49.9% to $11.7 million,
compared with an upside of 3.7% in coffeehouse sales.
We believe that Caribou Coffee remains well positioned to
sustain its growth momentum, while generating improved earnings on
the heels of innovative offerings. However, lowered outlook for
2012 and food cost pressure make us cautious. Hence, we maintain a
Zacks #3 Rank on Caribou Coffee, which translates into a short-term
Hold rating. Our long-term recommendation remains Neutral.
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