Peet's Coffee & Tea, Inc. (PEET)
The Company sells fresh roasted coffee, hand selected tea, and related merchandise in several distribution channels, including grocery, home delivery, food service and office accounts and company-operated retail stores.
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How could I express my complete disgust at PEET's $26 a share take-over of Diedrich's Coffee, a dog of a company I shorted here and in real life, with my loss locked in by PEET's offer? Ahhh, yes, short PEET.
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I don't get these guys. They just closed all their stores in the Denver metro area, and now they claim they are growing and opening new stores! I realize that coffee is all the rage right now, but here is another bubble that will burst, badly.
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Branding issues, inferior pastries to Starbucks
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Low margins, poor return on equity. Some people do actually need coffee, but they have less expensive options than this. And for that matter, investors have cheaper (and better) options than this...
A Starbucks (SBUX) fall does not necessarily mean that the company that could become the next Starbucks is such a great buy...
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The recession is going to hurt Peet's business in the short term, but it will come back strong after about a year.
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It is constantly going down. They are depending on the DSD market to elevate them and they are too expensive and not known around the country.
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I love finding these ones. 20% growth does not justify 50 p/e. As night follows day this one needs a correction and in the current environment it is coming soon.
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With a recession looming special upscale treats like coffee are not going to do well. I'd almost rather buy REITS over this.
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Rapidly losing market share. Earnings are suffering as a result. No distinguishing characteristics whatever. Destined to languish.
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Peets is going into the Holiday Season with no visible change at it's stores. They haven't quite gotten the merchandising thing together yet, and strong holiday sales that will push the S&P up going into Q107 will leave Peets behind
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A lot of short-term growth potential, but in the end, Starbucks will win.
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This is a very good company; one of its strengths is its focus on quality over growth rate. But that means its growth cannot support a 35 multiple, let alone the 45 multiple you get if you adjust last year's earnings for stock-based compensation.
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Peet's is careful about its expansion, limiting new stores so that quality of product and service can be tightly controlled and using mail order to serve customers in non-retail areas. Peet's also maintains good traffic & turnover in stores by limiting seating and not providing wireless access, yet the stores are always bustling. Amazing coffee and service, combined with prudent expansion, make this a winner longterm.
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Both Starbucks and Peet's are richly valued. If I had to choose one I'd choose the safer and more established Starbucks. Look for Peets to have mediocre at best returns.

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