Peets Coffee & Tea (PEET) 8-K Results of Operations and Financial Condition

Exhibit 99.1

FOR IMMEDIATE RELEASE

Media Contact: Patsy Barich Double Forte 415.848.8104 pbarich@double-forte.com Investor Contact: Seanna Allen Peet’s Coffee & Tea, Inc. 510.594.2196 investorrelations@peets.com

PEET’S COFFEE & TEA, INC. REPORTS THIRD QUARTER 2008 RESULTS AND GIVES FISCAL 2009 EARNINGS GROWTH GUIDANCE OF 20 TO 25%

EMERYVILLE, Calif. - October 28, 2008 - Peet’s Coffee & Tea, Inc. (NASDAQ: PEET) today announced results for its third quarter 2008 ended September 28, 2008. 

In this release, the Company:

·       Reports net revenue of $68.5 million, an increase of 12.5% versus last year,

·       Reports diluted earnings per share of $0.15, an increase of 15% versus last year,

·       Reaffirms diluted earnings per share expectations for the full year of $0.77 to $0.82, and

·       Gives guidance for 2009 of diluted earnings per share growth of 20 to 25%.

For the 13 weeks ended September 28, 2008, net revenue increased 12.5% to $68.5 million from $60.9 million for the corresponding period of fiscal 2007. For the 39 weeks ended September 28, 2008, net revenue increased 15.2% to $205.7 million from $178.5 million for the corresponding period of fiscal 2007.

Net income for the quarter was $2.0 million or $0.15 per diluted share, compared to $1.8 million or $0.13 per diluted share last year. Year-to-date, net income was $7.1 million or $0.51 per diluted share, compared to $5.1 million or $0.36 per diluted share last year.

“We are on track to deliver within our earnings per share guidance for the year and well positioned for 20 to 25% earnings per share growth next year,” said Patrick O’Dea, president and chief executive officer of Peet's Coffee & Tea. “While our grocery growth rate in the quarter was below our year-to-date trend, this was largely due to a shift in timing of new distribution and promotion activity from September into October. Overall, I’m encouraged by the strength of our business despite the economic environment. It’s a tribute to the Peet’s brand and people.”

Financial and Operating Summary

Retail net revenue increased 11% to $45.9 million for the quarter from $41.5 million for the corresponding quarter last year. The increase was primarily attributable to new retail stores opened in the last 12 months and growth in existing stores. The Company opened three new retail locations during the quarter.

Specialty net revenue increased 16% to $22.6 million for the quarter from $19.4 million for the corresponding quarter last year. Within the specialty business, grocery grew 15%, foodservice and office sales were up 34%, and the home delivery business declined 2.5% compared to the same period last year.

Cost of sales and related occupancy costs decreased to 47.1% of total net revenue for the quarter compared to 47.9% for the corresponding quarter last year. The decrease from last year was due to procurement savings, increased prices in retail and grocery, and leverage of costs related to the roasting facility that opened last year, partially offset by higher green coffee costs.

Operating expenses as a percent of net revenue increased to 36.1% of total net revenue for the quarter compared to 35.5% for the corresponding quarter last year. The increase was due primarily to higher costs associated with expanding the grocery business.

General and administrative expenses increased to $5.2 million for the quarter from $4.9 million for the corresponding quarter last year primarily due to additional headcount and other investments to support the Company’s growth.

Depreciation and amortization expenses increased to $3.2 million for the quarter from $2.6 million for the corresponding quarter last year. The increase was primarily due to the opening of 23 new retail stores in the last 12 months.

The Company ended the quarter with cash and cash equivalents plus marketable securities of $14.8 million.

Fiscal 2009 Outlook

Looking ahead, Peet’s provided the following fiscal 2009 guidance:

·      Total net revenue is expected to grow 12 to 15%,

·      Diluted earnings per share is expected to grow 20 to 25% and be in the $0.94 to $1.00 range, and

·      The Company is planning to open about 10 new retail locations and 30 to 40 new licensed locations.

Peet’s Coffee & Tea, Inc. Q3 2008 Conference Call

The Company will report its third quarter 2008 earnings results via conference call on Tuesday, October 28, 2008.  The teleconference call will begin at 2:00 p.m. PT/5:00 p.m. ET. 

The teleconference can be accessed by calling 1-877-604-9667. The call will be simultaneously webcast on Peet’s Web site at www.peets.com. A replay of the teleconference will be available through 5:00 p.m. PT/8:00 p.m. ET through 8:59 p.m. PT/11:59 p.m. ET on Tuesday, November 4, 2008, at 1-888-203-1112 or 1-719-457-0820, using access code 9429411. It will also be archived at http://investor.peets.com/medialist.cfm through October 28, 2009.

ABOUT PEET’S COFFEE & TEA, INC.

Peet's Coffee & Tea, Inc., (PEET), is the premier specialty coffee and tea company in the United States. Peet's buys the highest quality beans in the world, artisan roasts every bean by hand to order, and delivers all of its coffee quickly for superior freshness no matter where it is sold. Founded in 1966 in Berkeley, Calif. by Alfred Peet, who is widely recognized as the grandfather of specialty coffee in the U.S., Peet's has a rapidly growing, passionate customer following that seeks out Peet's coffees wherever they go. Peet's is committed to strategically growing its business through many channels without compromising the extraordinary quality of its coffee. For more information about Peet's Coffee & Tea, Inc. visit www.peets.com.

##

This press release contains statements that are not based on historical fact and are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward looking statements include statements relating to 2008 forecasted earnings per diluted share and 2009 forecasted net revenue growth, earnings per diluted share and expected retail and license location growth for 2009. Forward-looking statements are based on management’s beliefs as well as assumptions made by and information currently available to management, including financial and operational information, the Company’s stock price volatility, and current competitive conditions.  As a result, these statements are subject to various risks and uncertainties.  The Company’s actual results could differ materially from those set forth in forward-looking statements depending on a variety of factors including, but not limited to, general economic conditions, including the current credit crisis and its impact on the economy and consumer spending, the Company’s ability to implement its business strategy, attract and retain customers, and obtain and expand its market presence in new geographic regions; the impact of the Company’s stock price volatility on the valuation of stock-based compensation under SFAS 123(R); the availability and cost of high quality Arabica coffee beans; consumers’ tastes and preferences; and competition in its market as well as other risk factors as described more fully in the Company’s filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 30, 2007.  These factors may not be exhaustive.  The Company operates in a continually changing business environment, and new risks emerge from time to time.  Any forward-looking statements speak only as of the date of this press release.

PEET’S COFFEE & TEA, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands, except share amounts)

	September 28,		December 30,
	2008		2007
ASSETS
Current assets
Cash and cash equivalents	$	3,889	$	15,312
Short-term marketable securities		10,893		7,932
Accounts receivable, net		9,642		8,287
Inventories		29,698		24,483
Deferred income taxes - current		2,937		2,950
Prepaid expenses and other		9,806		4,285
Total current assets		66,865		63,249
Long-term marketable securities		-		7,831
Property, plant and equipment, net		107,564		99,231
Deferred income taxes - non current		3,000		3,353
Other assets, net		3,893		3,883
Total assets	$	181,322	$	177,547
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and other accrued liabilities	$	9,934	$	10,104
Accrued compensation and benefits		10,470		8,909
Deferred revenue		4,477		5,856
Total current liabilities		24,881		24,869
Deferred lease credits and other long-term liabilities		7,030		5,425
Total liabilities		31,911		30,294
Shareholders' equity
Common stock, no par value; authorized 50,000,000 shares; issued and outstanding:13,653,000 and 13,932,000 shares		99,662		104,616
Accumulated other comprehensive income		19		52
Retained earnings		49,730		42,585
Total shareholders' equity		149,411		147,253
Total liabilities and shareholders' equity	$	181,322	$	177,547

PEET’S COFFEE & TEA, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited, in thousands, except per share amounts)

	Thirteen weeks ended				Thirty-nine weeks ended
	September 28,		September 30,		September 28,		September 30,
	2008		2007		2008		2007
Retail stores	$	45,911	$	41,450	$	136,829	$	121,436
Specialty sales		22,575		19,410		68,847		57,040
Net revenue		68,486		60,860		205,676		178,476
Cost of sales and related occupancy expenses		32,249		29,142		96,478		84,706
Operating expenses		24,715		21,593		72,934		62,772
General and administrative expenses		5,237		4,928		16,233		16,228
Depreciation and amortization expenses		3,150		2,619		9,395		7,935
Total costs and expenses from operations		65,351		58,282		195,040		171,641
Income from operations		3,135		2,578		10,636		6,835
Interest income		130		284		636		1,172
Income before income taxes		3,265		2,862		11,272		8,007
Income tax provision		1,247		1,026		4,127		2,953
Net income	$	2,018	$	1,836	$	7,145	$	5,054
Net income per share:
Basic	$	0.15	$	0.13	$	0.52	$	0.37
Diluted	$	0.15	$	0.13	$	0.51	$	0.36
Shares used in calculation of net income per share:
Basic		13,603		13,816		13,825		13,664
Diluted		13,899		14,168		14,111		14,057

SEGMENT REPORTING

(Unaudited, dollars in thousands)

	Retail					Specialty					Unallocated			Total
			Percent					Percent								Percent
			of Net					of Net								of Net
	Amount		Revenue			Amount		Revenue						Amount		Revenue
For the thirteen weeks ended September 28, 2008
Net revenue	$	45,911		100.0	%	$	22,575		100.0	%				$	68,486		100.0	%
Cost of sales and occupancy		21,130		46.0	%		11,119		49.3	%					32,249		47.1	%
Operating expenses		19,940		43.4	%		4,775		21.2	%					24,715		36.1	%
Depreciation and amortization		2,357		5.1	%		372		1.6	%	$	421			3,150		4.6	%
Segment operating income		2,484		5.4	%		6,309		27.9	%		(5,658	)		3,135		4.6	%
For the thirteen weeks ended September 30, 2007
Net revenue	$	41,450		100.0	%	$	19,410		100.0	%				$	60,860		100.0	%
Cost of sales and occupancy		19,510		47.1	%		9,632		49.6	%					29,142		47.9	%
Operating expenses		18,109		43.7	%		3,484		17.9	%					21,593		35.5	%
Depreciation and amortization		2,075		5.0	%		314		1.6	%	$	230			2,619		4.3	%
Segment operating income		1,756		4.2	%		5,980		30.8	%		(5,158	)		2,578		4.2	%
For the thirty-nine weeks ended September 28, 2008
Net revenue	$	136,829		100.0	%	$	68,847		100.0	%				$	205,676		100.0	%
Cost of sales and occupancy		62,191		45.5	%		34,287		49.8	%					96,478		46.9	%
Operating expenses		58,791		43.0	%		14,143		20.5	%					72,934		35.5	%
Depreciation and amortization		7,244		5.3	%		1,029		1.5	%	$	1,122			9,395		4.6	%
Segment operating income		8,603		6.3	%		19,388		28.2	%		(17,355	)		10,636		5.2	%
For the thirty-nine weeks ended September 30, 2007
Net revenue	$	121,436		100.0	%	$	57,040		100.0	%				$	178,476		100.0	%
Cost of sales and occupancy		56,684		46.7	%		28,022		49.1	%					84,706		47.5	%
Operating expenses		52,517		43.2	%		10,255		18.0	%					62,772		35.2	%
Depreciation and amortization		6,218		5.1	%		985		1.7	%	$	732			7,935		4.4	%
Segment operating income		6,017		5.0	%		17,778		31.2	%		(16,960	)		6,835		3.8	%

Presentation and reconciliation of Non-GAAP Financial Measures

The following table reconciles non-GAAP net income per share and net income, excluding the after tax costs associated with the Company’s stock option review and restatement, to GAAP net income per share and net income. The Company is presenting these non-GAAP financial measures to illustrate the effect on net income and net income per share if the Company had not incurred the costs of the review of its stock option granting practices. The Company uses such non-GAAP financial measures to analyze and compare the performance of its core business. Non-GAAP financial information is not prepared under a comprehensive set of accounting rules and should be considered supplemental to, and not a substitute for or superior to, financial measures calculated in accordance with GAAP.

	Thirteen weeks ended					Thirty-nine weeks ended
	September 28,		September 30,			September 28,			September 30,
	2008		2007			2008			2007
	(unaudited, in thousands,					(unaudited, in thousands,
	except per share amounts)					except per share amounts)
Net income, as reported	$	2,018	$	1,836		$	7,145		$	5,054
Stock option review professional fees		-		188			16			1,228
Income tax benefit		-		(67	)		(6	)		(453	)
Net income, excluding fees	$	2,018	$	1,957		$	7,155		$	5,829
After tax impact of review professional fees	$	-	$	121		$	10		$	775
Diluted net income per share:
Net income, as reported	$	0.15	$	0.13		$	0.51		$	0.36
Stock option review professional fees		-		0.01			-			0.09
Income tax benefit		-		-			-			(0.03	)
Diluted net income, excluding fees*	$	0.15	$	0.14		$	0.51		$	0.41
After tax impact of review professional fees*	$	-	$	0.01		$	-		$	0.06

* per share data may not sum due to rounding