Peet's Delivers as Expected

Last night, Peet's Coffee & Tea (NASDAQ:PEET) reported a solid, if unspectacular first quarter. The specialty coffee roaster presented earnings of $0.16 a share and forecast full-year earnings of exactly four times the quarterly figure, or $0.64.

The analyst community has come to expect predictable performance, since the average forecast has been spot on for three of the last five quarters. This time, however, Peet's overdelivered by two cents.

The brew is sweetened by the fact that Peet's is growing predictably, delivering another 24.3% year-over-year sales growth performance. The company is on pace for a third consecutive year of more than 20% sales growth. With stable gross and net margins, that operating cash flow is available for further expansion of the business. The streak of success just so happens to coincide with the installation of Patrick O'Dea as CEO.

Peet's is expecting to open another 23 to 28 stores this year, expanding its West Coast-based retail network by somewhere between 20% and 25%. On top of that, the grocery store affiliate program is growing like gangbusters, up 48% over last year and currently delivering Peet's hand-roasted beans to 4,000 supermarkets nationwide.

To ensure continued growth, a new roasting facility is under construction in Alameda, Calif. Peet's is not trying to become a Starbucks (NASDAQ:SBUX) carbon copy, with baristas on every street in the nation. Rather, it prefers to use its coffee shops as promotional tools: the idea is to give customers a chance to sample and hopefully get hooked on the product. The customer might then take a bag of beans home or pick one up in the supermarket at a later time. The bean is boss here, and the company philosophy is to grow quickly, but not at the expense of product quality.

That makes GreenMountain (NASDAQ:GMCR) or Coffee Holding (AMEX:JVA) more direct competitors to Peet's than Starbucks or Caribou Coffee (NASDAQ:CBOU), and there should be plenty of unclaimed market share to cover in the absence of the 800-pound gorilla of the coffee market.

Gourmet beans for brewing and enjoying at home are significantly more affordable than a daily Venti triple half-caf soy macchiato, and arguably tastier too. Put all of that together, and you have a tasty, consistent cup of opportunity for Peet's.

Related links:

• Boo Hoo, Caribou
• A Foolish Baby Shower: Starbucks
• Dueling Fools: Coffee Talk

Starbucks is a Motley Fool Stock Advisor selection.

Fool contributor Anders Bylund gets his coffee beans straight from the plantation in Guatemala, thanks to his lovely wife's extended family. He does not hold any stock in the companies mentioned here.