Scary Caribou

• Report this Comment On August 06, 2008, at 4:32 PM, JHeilicher wrote:

  Hey Alyce:

  Concider this;

  With a 40 million market cap, and 400 stores, that puts the liquidation value at about $100,000 per store owned.

  I would stand in line to buy up these stores at three times this number. Add the brand value and you could expect more.

  The bottom line will come as the stores mature and the G&A for expansion dwindle. Keep watching!

• Report this Comment On August 07, 2008, at 3:11 PM, FoolishMadDog wrote:

  Some more things to consider,

  For the most recent quarter starbucks had net sales of 2.6 B and market cap of 10 B as of this post. $1 of sbux stock would give you $.26 of revenue.

  For the most recent quarter Caribou had net sales of 63 M and a market cap of 41M as of this post. $1 of cbou stock buys you $1.54 of revenue.

  Caribou has always been unprofitable, but that was also during a time of expansion. If they stop the expansion to lower G&A or find a way to expand profitably they could have a significantly worse margin than sbux and still be giving great P/E if you buy at today's levels.

  There is significantly more chance of insolvency with Caribou than Starbucks, but there is also very little chance of starbucks becoming a five bagger in the next five years. Caribou also currently has no debt so any solvency issues are a ways down the road with plenty of time to refocus on profitability rather than the current (and probably incorrect) focus on expansion.

  I'd never recommend putting a huge percent of your portfolio in Caribou, but there is some huge potential for returns in the next five years if you are willing to put up with the risk due to the incredibly low expectations of this stock.

  Minnesota is one of the areas Starbucks has disproportionatly closed a larger percentage of stores in and that can only help Caribou with their large percent of stores in Minnesota.

  Finally as a Minnesota native I totally get the Caribou concept and enjoy it much more than Starbucks. I enjoy their larger and better selection of Mocha's and Latte's, love the relaxed feel with leather sofas and free wifi. I've tried McDonalds Mocha's and Latte's and they are not even close to Caribou. I might get a mocha if I am already at McDonalds, but I don't see many people that go to coffee houses just for the coffee, stopping that behavior and instead making a trip to McDonalds just for the coffee.

  I saw this as a value and picked up some shares at $1.60 and while it may not last due to the risk and volatility of this stock I'm enjoying the current runup and hoping for more in the next five years.

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