September 15, 2009

Coffee Stock Caribou Coffee CBOU Quick Take

Caribou beat by $.10 at the beginning of the year and had decent numbers in that hellish economy. In hindsight I guess that was one of the fundamental buy indicators. I was onto the stocks breakout but never bought any shares to hold. They have been upping guidance pretty consistently lately and I believe right now are guiding for $.38-.39 next full year. With the stock at $7.50 that seems about right at a forward PE of around 20.

The reason I am bringing up CBOU again though is I stumbled upon a coupon in the local newspaper advertising section for Caribou Coffee. What really surprised me was that the coupon was for buying their beans(or ground coffee beans). It said they were "available at a local grocery store near you." This is very good for the company and their brand. For years they have had independent reviews that ranked their coffees,especially their light roast coffees higher than competitors like Starbucks.

For some reason over the years they had been slow to sell their coffee in stores. Wholesale businesses getting coffee directly to consumers from other stores are what has propelled Diedrich Coffee (DDRX) from $.40 this year to $25. I probably had been saying that in my older CBOU posts. I knew it to be true since 2005 before Caribou started the aggressive turnaround.

What selling more of the coffee in stores means to me is it can act as a cushion around store operations because of its profitability, allow more consumers to find their brand, and possible allow for more upside surprise in EPS.

full disclosure:no position