Peet''s Coffee & Tea, Inc. (PEET)
Q3 2010 Earnings Call Transcript
November 2, 2010 5:00 p.m. ET

Executives

Paul Yee – Senior Director, Investor Relations and Finance
Patrick J. O''Dea – President and Chief Executive Officer
Thomas P. Cawley – Chief Financial Officer

Analysts

David Tarantino – Robert W. Baird & Company
Steve West – Stifel Nicolaus
Gregory McKinley – Dougherty & Company
Mitchell Pinheiro – Janney Montgomery Scott
Colin Guheen – Cowen and Company
Michael Wolleben – Sidoti & Company

Presentation

Operator

Good day, everyone and welcome to Peet''s Coffee & Tea Third Quarter 2010 Earnings Results Conference Call. As a reminder, this call is being recorded and we will be conducting a question-and-answer session after the presentation. I will now turn the call over to call Paul Yee, Peet''s Senior Director of Investor Relations and Finance. Please go ahead.

Paul Yee

Thank you, operator. Today, I''m joined by President and Chief Executive Officer, Pat O''Dea and Chief Financial Officer, Tom Cawley.

As we begin, I need to inform you that the information being discussed in this conference call will include forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those projected in these forward-looking statements. And Peet''s can give no assurance to the effect of these statements and we assume no obligation to update them.

For additional information concerning factors that could cause actual results to differ materially from those in our forward-looking statements, please refer to the section titled Risk Factors in the most recent Annual Report on Form 10-K for the year ended January 3, 2010 filed with the SEC on March 19 of this year. It''s also available on Peet''s website.

Now, I''d like to turn it over to Pat.

Patrick J. O’Dea

Thanks, Paul. In our call today, we will provide third quarter results and our full-year outlook, then come back to share some perspective on 2011.

First from an earnings standpoint, third-quarter EPS of $0.28 was up 47% versus year ago. Based on this strong performance and our outlook for the fourth quarter, we are raising our non-GAAP EPS for the full year from the previous guidance of $1.27 to $1.30, to $1.30 to $1.33. In addition, we are also establishing EPS guidance for 2011 of $1.53 to $1.60.

Second from a sales standpoint, we grew 9% in Q3, resulting in a year-to-date growth rate of 10%. Our growth continues to be led by our grocery business which was up 24% in the quarter and 30% year-to-date.

Third, we continue to improve the profitability of our business as operating margins expanded 210 basis points in the quarter despite higher year-over-year input court costs. Tom will provide some more insight here in a minute.

Finally, we took a price increase in our retail and home delivery businesses effective at the start of the fourth quarter and have announced a price increase to our food service and office customers, most of which will occur at the start of 2011. We have not taken any pricing in the grocery channel at this point.

Our third quarter results were not impacted by pricing and our outlook for the rest of this year and next firmly assumes the pricing that we have already announced. All in all, it was a strong quarter. We feel good about where we will finish this year and we are prepared as we enter 2011.