Hot tea was iced down as recent IPO Teavana
The fast-growing chain selling loose-leaf teas and artisanal tea-making gear posted strong numbers, but it disappointed investors holding out for more in its guidance for the seasonally potent holiday quarter. The end result is that Teavana has the sorry distinction of being one of the few stocks to post double-digit percentage declines during the most bullish weekly Wall Street run in years.
Teavana's quarter was tight. Net sales climbed 35% to $33.4 million. Brisk expansion and an 8.5% spike in comps helped fuel the 196-unit chain's top-line growth. Net income tripled to $0.02 a share.
Unfortunately, the company's outlook for all of fiscal 2011 calls for a profit of $0.43 a share to $0.45 a share on $162 million to $166 million in net sales. Analysts were slurping away at the high end of those ranges, and that's apparently not good enough for a fresh stock with a lofty valuation.
There's clearly a market for premium hot beverages. Where would Starbucks
If tea can get the same kind of makeover as java, Teavana will be ahead of the curve with its aromatic stores stocking more than 100 varieties of high-end teas.
Before Teavana's summertime IPO, there really wasn't a pure tea play on the market. Celestial Seasonings parent Hain Celestial
I'll make this interesting. As part of our CAPScall initiative for accountability, I'm initiating a bullish call for Teavana on Motley Fool CAPS. I like my timing. The stock closed below its $17 IPO price on Friday for the first time in its brief publicly traded life.
The opportunity to get in at a better price than this summer's first public investors is too tempting to ignore.
Add Teavana Holdings to My Watchlist to see if Rick is right. If you want to track the other sultans of tea and coffee, add Unilever, Starbucks, The Hain Celestial Group, or Green Mountain to My Watchlist.
The Motley Fool owns shares of lululemon athletica and Starbucks. Motley Fool newsletter services have recommended buying shares of Unilever, lululemon athletica, Starbucks, and Green Mountain Coffee Roasters. Motley Fool newsletter services have also recommended creating a lurking gator position in Green Mountain Coffee Roasters. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story, except for Green Mountain. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.