Caribou Coffee (Nasdaq: CBOU) wants to be the next Starbucks (Nasdaq: SBUX).
It's a fast-growing gourmet coffeehouse. It has expanded into branded food products and beverages. It has even stepped in to honor bogus Starbucks coupons when the java giant bailed on the responsibility.
Unfortunately, the only way that Caribou will ever top Starbucks is alphabetically.
Caribou posted another raspberry-stained quarterly report yesterday. The chain posted a loss of $0.10 a share. Revenue inched 18% higher to hit $66.7 million, due mostly to the company's aggressive expansion. Comps rose 2%, but that was not enough to offset what turned out to be a 1% decline in store level sales for all of 2006.
In Caribou's defense, comps soared 6% higher in 2005.
As far as concepts go, Caribou is a bit like the Willy Wonka of coffeehouses. It's always concocting new flavors, like gingerbread latte and pumpkin spice. The ingenuity isn't limited to sip-worthy brews. Like Starbucks, Caribou has turned to baked goods and sandwiches to win folks back after the morning rush.
Caribou began selling bagels back in September. It is now committed to introducing at least one new food product per quarter.
Oddly enough, the innovation isn't always there. Last month, Caribou announced that it will be joining others like Diedrich Coffee (Nasdaq: DDRX) and Green Mountain (Nasdaq: GMCR) in offering K-cups for single-serving Keurig coffeemakers. However, its eight introductory flavors are pretty common ones for the most part, differing mostly by region.
Caribou is trying hard to matter outside of the coffeehouse. It sells chilled coffee-based beverages through Coca-Cola (NYSE: KO ) . It sells granola bars through General Mills (NYSE: GIS ) . The foodstuffs push finds the Caribou brand popping up in markets where it hasn't even set up a coffeehouse yet. That's a good thing. However, we still can't put a whole lot of weight into these items. The company is generating less than 5% of its revenue on non-coffeehouse ventures like these.
What does the future hold for Caribou? The company is going to open another 50-70 stores. Unlike its bankrolled past -- 440 of its existing 464 locations are company-owned -- the company's franchised locations will likely double in 2007.
Will the franchise revenue and food industry royalties help deliver a profit? That may not happen until 2008 at the earliest. That is a concern, because the smaller Peet's (Nasdaq: PEET) is profitable, and we all know the Starbucks story.
We can admire Caribou's tenacity and deal-brokering skills. However, until it finds a way to wipe clean that raspberry-flavored income statement, sip carefully.
For more on those high-octane beverage makers, check out:
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Longtime Fool contributor Rick Munarriz can actually walk to two Starbucks stores from his home, but he's still not much of a coffee sipper. He does not own shares in any of the companies in this story. He is also part of the
Rule Breakers
newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool's disclosure policy enjoys a nice bagel in the morning.
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