Caribou Coffee in Minnesota is thriving, beating out Starbucks in earnings for the state, but unfortunetly Caribou's stock values tell a different story of success nationally.
The Star Tribune's Sunday article "Caribou stock: Half full or half empty" Caribou remains largely a Minnesota" reported that the coffeehouse remaind largely a Minnesotan phenomenom and accorrding to stocks failing to outmuscle Starbucks in any state but it's own. In fact, caribou hasn't turned a profit since 2002.
However, the paper questions whether Caribou is really doing as poorly as the numbers suggest. The stock originated at $14 a share when the company went public in September of 2005, but on Friday closed at a amount far off from it's strting value: $2.61. It is rare for a compny to trade below book value.
Caribou still has 51 cents of cash value per share, meaning buyers must pay just over $2 for the stock once that cash value is subtracted and owning equity with book value $3.06 per share.
The Star Tribune goes on to ask if this is a classic deep-value play, or yet another trap in a free-faliing market.
The paper reported the answer seems unclear because Caribou has been reluctant to provide guidance and have only said a long-term plan is being created in recent month. In addition two top executives resigned during this time.
Their is alot of uncertainty around the company's business model and long term prospects and Caribou needs to pick a leader and move ahead, in addition to their recent liscensing and franchise deals and increased sales through commercial customers, said David E. Tarantino, an analyst with Robert W Baird & Co. Inc., an international firm based in Milwaukee.
Caribou is hoping to improve business by focusing on their stores that are successful and closing the weaker links. The company has closed 28 stores in the last year and a similiar number of closures are planned for this year, said the Star Tribune.
"We're going to have a healthier store base," said the investor relations spokeswoman Kathleen Heaney to the Star Tribune. "We want to focus on the states we're already in."
This pan is expected to eventually help limit Caribou's losses the paper reported. In 2007 the comapny had an estimated loss of 71 cents per share, but it is expected to be narrowed down to 37 cents per share in 2009.
Alfred Marcus, a professor of strategic management at the Carlson School of Management at the Univerisity of Minnesota told the paper Caribou is not doomed just because it is a smaller competitor up against the giant, Starbucks and that dominating a regional can be a very power position, but Caribou must strive to differentiate themselves from Starbucks.