Caribou Coffee Company, Inc. (CBOU)
Q3 2012 Earnings Call
November 8, 2012 4:30 PM ET
Mike Jensen – IR
Mike Tattersfield – President and CEO
Tim Hennessy – CFO
David Tarantino – Robert W Baird
Will Slabaugh – Stephens
Nicole Miller – Piper Jaffray
Andy Barish – Jefferies
Sharon Zackfia – William Blair
Matt Bendixen – Craig-Hallum Capital Group
Howard Penney – Hedgeye Risk Management
Kevin Tracey – Oberon Asset Management
Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Caribou Coffee Incorporated Third Quarter 2012 Results Conference Call.
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I would now like to turn the conference over to Mr. Mike Jensen of Caribou Coffee. Please go ahead, sir.
Thank you, and good afternoon, everyone. Caribou Coffee’s third quarter 2012 earnings press release was distributed this afternoon after the market closed. If you do not have a copy one maybe found on our website at cariboucoffee.com in the Investors section.
Joining us today are Mike Tattersfield, President and Chief Executive Officer; and Tim Hennessy, Chief Financial Officer.
Please note that part of our discussion today will include forward-looking statements. These statements are not guarantees of future performance and therefore undue reliance should not be placed upon them. The Company undertakes no obligation to update any forward-looking statements in order to reflect the events or circumstances that may arise after the date of this conference call. Actual results may differ materially from those indicated in our forward-looking statements and reported results should not be considered indicative of future performance.
We refer you to Caribou Coffee’s recent filings with the SEC for a more detailed discussion of the risks and uncertainties that could impact the future operating results and financial conditions. Specifically, these risks and uncertainties are described in our most recent Annual Report on Form 10-K, which is on file with the SEC. We will continue to update risks and uncertainties in reports that we subsequently file with the SEC.
On today’s call, we will also discuss some non-GAAP financial measures as we talk about the company’s performance. These will include financial terms such as EBITDA and pro forma net income. While these are non-GAAP measures, management believes they are useful tools in evaluating the company’s performance. Reconciliations of these non-GAAP measures to the GAAP measures we consider most comparable can be found in today’s press release, which is also available on our website in the Investors section.
With that, I would now like to turn the call over to Mike Tattersfield, our CEO.
Thank you, Mike. Good afternoon, everyone and thank you for joining us on today’s call. I’ll lead out the call with some remarks on our performance against our five lever growth strategy. I will then turn things over to Tim for a discussion of the third quarter financials, our outlook for the remainder of 2012 as well as a preview of our expectations for 2013. At that point we will open up the line for any questions you may have.
Our third quarter performance was solidly in line with our expectation as outlined on our last call, especially in light of the reset and expectations related to the lower green coffee sales in our commercial channel for the current business. We are very pleased the comparable coffeehouse sales were up 3.5% in the quarter near the upper end of our 2% to 4% guidance range.
We also opened 20 new coffeehouses in the quarter six of which were company-owned. Our development team and franchise partners are having a busy fourth quarter as well and we expect to deliver within our range of 10% to 12% total unit growth for the year.
Our Q3 EPS was $0.08, which was slightly better than our expectations and $0.01 better than pro forma EPS of $0.07 a year ago.
We continue to focus on our consistent multi-channel premium coffee business model and are confident in our ability to drive continued growth across all of our lines of business. Our largest segment, the retail coffeehouse channel, performed exceptionally well in the third quarter. Comparable coffeehouse sales were driven by our continued efforts in beverage innovation and food expansion.
In our second quarter, the launch of our carbonated juice and tea platform provided a substantial lift in Q3. This remain particularly relevant as we’re continuing to experience a warmer than usual summer in many of our key markets. We also benefited significantly in the third quarter from the bakery case upgrade, which we rolled out system-wide in mid-August. This upgraded bakery platform, which is inspired by a classic American bake shop motif, added an incremental point of attachment post-launch.
Looking forward, we have some exciting product categories that will continue to drive benefits to our same-store sales. Building off of the success of our spicy real chocolate beverages over the past two years for the upcoming holiday season we will feature a real caramel beverage platform. We are launching this holiday line with the same motivation we had around our real chocolate beverages, real is better, and our guest deserve premium ingredients that match up to the highest quality coffee and espresso. Having sampled these beverages myself, I’m certain that the new caramel platform will add great joy to the holiday season for many of our guests.