Caribou's Still Grounded

It's one thing for management to be optimistic, but ignoring reality is an entirely different story.

Yet that's just what the folks over at Caribou Coffee (NASDAQ:CBOU) seem to be doing these days. CEO Michael Coles was proud of his company's strong sales results, particularly its non-coffeehouse revenue. He believes Caribou is successfully building brand recognition and increasing sales. But he failed to mention that his company also continues to lose more money in the meantime.

For the first quarter, Caribou's total sales increased 11% to $61.9 million, while other sales, which include commercial customers, licenses, and mail and Internet sales, were up 41%. Of course, further down in the report is the mention of same-store sales, which fell 1%, just as they did in the first quarter of last year. Even further down, you finally learn that the company lost $3.3 million, or $0.17 per share. That doubles last year's first-quarter loss of $1.6 million.

Despite its remarkable sales, the company left its full-year expectations unchanged. For the year, it expects comps to fall in a range between flat and up 5%, with overall sales expected to grow by 40% to 50%. Caribou plans to open 50 to 70 new coffeehouses to generate that growth. However, there is no mention of how much the company expects to earn in the year.

I realize Caribou faces a daunting task trying to compete in a market where there seems to be a Starbucks (NASDAQ:SBUX) on every corner. I'm just not sure opening a plethora of new stores with no regard for making a profit is the best approach. Maybe it should take a peek at Peet's Coffee & Tea (NASDAQ:PEET), which is also trying to get a piece of the coffee market and is aggressively opening stores yet actually makes a bit of money in the process.

Growth-oriented investors may be attracted to Caribou for its potential. However, I'd say that with profits not expected for a few more years, Caribou just won't provide that jolt that investors crave in their portfolios.

For more on what's brewing with the coffee makers, check out:

• My Life as a Frappuccino
• Caribou Coffee Percolates: Fool by Numbers
• Peet's Keeps Percolating

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Fool contributor Mike Cianciolo welcomes feedback and doesn't own any of the companies in this article.