Fans of "The Muppets" may remember a series of off-the-wall hilarious ads for Wilkins Coffee filmed in black and white in the late 1950s and starring some early Muppets -- one, notably, in which Muppet Wilkins hands his friend Wontkins a live grenade when he refuses a cup, leaves the scene and, after it explodes, remarks that "some people just go to pieces without their Wilkins Coffee." (Others featured razors, blowtorches, machine guns, and the like.)
Starbucks (NASDAQ:SBUX) competitors may sometimes feel as though they're holding a live grenade themselves: The massive coffee company has achieved a market position few people -- even devoted coffee drinkers -- could have anticipated 10 or 20 years ago. Oddly enough, however, there are companies out there fighting the "good fight" and, even more oddly, making money on it.
Diedrich Coffee (NASDAQ:DDRX) is just one example. On Wednesday night, Diedrich, which owns the Gloria Jean's, Coffee People, and eponymous brands, reported fiscal 2004 (ended June 30) financial results that looked generally good -- though there's definitely room for improvement, as illustrated by the fact that investors pulled the company's shares down slightly in yesterday's session.
The main reason for this is that the company's main brand, Gloria Jean's, was the only one to turn in declining same-store sales for the year. It finished weakly, meanwhile, in Q4 -- bad news since the vast majority of its outlets are mall-based Gloria Jean's franchises. (Most of its Coffee People and Diedrich stores are company-owned.) Total revenues, meanwhile, fell year-over-year. There was better news in the announcements that gross and operating margins improved; the company managed a slim net profit after losing $1.2 million a year ago.
So how will a growing Diedrich perform? That's the question with management investing this year as it plans to continue growing its franchise business into a competitive branded coffee business that also includes Peet'sCoffee (NASDAQ:PEET), Juan Valdez, and others. Investors, for their part, don't appear concerned: The company's shares are well ahead of the S&P 500 over the last 12 months.
Fool contributor Dave Marino-Nachison doesn't drink coffee (save the occasional espresso) or own any of the companies in this article.
