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Issue Date: Vol. 52, No. 5, May 2012, Posted On: 5/3/2012

Green Mountain's Shares Decline On Outlook For Year Ahead

by Staff Reporter
office coffee service, OCS supplies, Green Mountain Coffee Roasters, Keurig, single-cup coffee market, Keurig brewer, Lawrence J. Blanford, Green Mountain 2012 second quarter, vending business

WATERBURY, VT -- Green Mountain Coffee Roasters Inc. reported a 42% increase in its fiscal second-quarter profit, as sales of its Keurig coffee products helped drive revenue higher. Net income increased to $93 million, or 58¢ a share, in the three months ended March 24, compared with $65.4 million, or 44¢ a share, in the comparable period last year.

Looking ahead, president and chief executive Lawrence J. Blanford reported that the company is expecting moderated growth for both Keurig brewer and K-Cup pack sales. That news set off a sell-off that sent Green Mountain shares down more than 40% on Wednesday, May 2.

In the official announcement on May 2 for its second quarter of fiscal 2012, Green Mountain highlighted:

» Net sales of $885.1 million, up 37% over net sales of $647.7 million in the year-ago quarter;

» GAAP EPS of 58¢ compared to second quarter fiscal year 2011 GAAP EPS of 44¢; non-GAAP EPS of $0.64 increases 33% over 48¢ in the year-ago quarter;

» GAAP operating income of $149.6 million compared with second quarter fiscal year 2011 GAAP operating income of $119.6 million; non-GAAP operating income of $162.3 million improves 22% over the year-ago quarter;

» GAAP net income of $93.0 million compared with second quarter fiscal year 2011 GAAP net income of $65.4 million; non-GAAP net income of $101.7 million increases 42% over the year-ago quarter.

"Over the past several years, we achieved a strong net sales growth rate driven by consumers' rapid acceptance of our innovative Keurig single-cup brewing system," Blanford said. "Additionally, during this timeframe we made a number of strategic acquisitions that strengthened our long-term position and contributed to our growth rate. During the second fiscal quarter our 37% net sales growth resulted from more consumers adopting the ease and convenience of Keurig's "Choose. Brew. Enjoy." approach to beverages. Despite lower-than-anticipated portion pack sales, and to a lesser degree, brewer sales, in the quarter we were able to control sales, general and administrative expenses enabling us to achieve non-GAAP earnings per share growth of 33%.

"Based on the consumer surveys conducted on our behalf, we estimate our U.S. Keurig single-cup brewer installed base has increased to between 10.8 and 12.2 million brewers in use in households as of March 2012, a substantial increase from where we believe our installed base was just one year ago," Blanford continued. "After several quarters of robust adoption, we now expect a more moderated growth trajectory going forward for both Keurig brewer and K-Cup pack sales. Based upon our estimate that our installed base represents a relatively small percentage of the total estimated 90 million U.S. households with a coffee maker, we remain enthusiastic about the long-term opportunity for continued Keurig brewer adoption as well as initial consumer reaction to our recently introduced Vue brewer."

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