Shares of Peet's Coffee & Tea
Peet's coffee is now available in more than 2,700 grocery stores, roughly 1,000 more than in the same period last year. It uses its own direct-store delivery system to ensure that the coffee customers buy in their local grocery stores meets the company's reputation and standards for quality and freshness.
Peet's coffee can be found in a wide range of grocery stores, including high-profile outlets, such as Whole Foods Market
In addition, the company announced that its board had approved repurchases of 1 million shares, or 7.7% of the shares outstanding. With $43 million in cash and no long-term debt, the company's balance sheet is in great shape, and management is demonstrating its willingness to return cash to the shareholders.
Three years ago, market leader Starbucks
Peet's, on the other hand, is committed to growing its store base with only company-owned and operated stores. The company operates 75 locations, and wants to open 15-20 more stores in 2004. It has a loyal following of "Peetniks" (the first Peet's coffee shop was, after all, opened in Berkeley in the 1960s), who insist that Peet's coffee is better than the coffee found anywhere else.
With most investors focused on Starbucks, Peet's is trading at a more attractive valuation than its larger competitor. Peet's stock is currently priced at 1.96 times sales and 2.46 times book value, compared to Starbucks, which is more richly valued at 3.37 times sales and 6.51 times book value. With only 75 stores (to Starbucks' more than 7,600) and just $115 million in revenues, the growth potential for Peet's is arguably much greater than it is for Starbucks, which is now almost 40 times larger (on a revenue basis) than Peet's.
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When he's not in the mountains hiking, biking, or skiing, Fool contributor Salim Haji writes about stocks from his home in Denver, Co. He does not own shares of Peet's or Starbucks.