Green Mountain net rises; shares off on outlook

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 Feb. 6, 2013, 4:32 p.m. EST 

 http://www.marketwatch.com/story/green-mountain-net-rises-shares-off-on-outlook-2013-02-06?siteid=bigcharts&dist=bigcharts

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By Debbie Cai

Green Mountain Coffee Roasters Inc.'s GMCR -2.48% fiscal first-quarter profit rose 3%, though a year-earlier asset-sale gain dampened the effect of a double-digit rise in sales in the latest period.

Shares slumped 10% at $43.88 after hours as the company projected downbeat sales growth for the current quarter.

"For the remainder of the year, we expect to see continued year-over-year gross-margin improvement due to lower green-coffee costs and ongoing brewer quality improvements," Chief Executive Brian P. Kelley said. "While we expect growth will continue to moderate in the overall total coffee and espresso maker category, we also expect our share of the category to continue to increase driving further expansion of our installed Keurig brewer base."

For the current quarter, the company predicted adjusted earnings of 70 cents to 75 cents a share, with sales growth of 14% to 18%. Analysts polled by Thomson Reuters most recently expected 73 cents in earnings and 20% sales growth.

For the new year, the company raised its adjusted earnings estimate, now forecasting $2.72 to $2.82 a share, from a November projection of $2.64 to $2.74 a share, while maintaining its sales guidance.

Green Mountain Coffee, which makes Keurig single-serve coffee brewers and K-Cup packs and has been the dominant player in its industry, but has faced challenges over the past year such as competition from Starbucks Corp.'s (SBUX) espresso-based coffee maker and lower-priced off-label K-cup knockoffs. It has, however, now maintained improved results over the past two years.

The company finalized its leadership two months ago by naming independent director Norman H. Wesley as chairman and former Coca-Cola Co. (KO) executive Brian Kelley as chief executive.

For the quarter ended Dec. 29, Green Mountain reported a profit of $107.6 million, or 70 cents a share, up from $104.4 million, or 66 cents a share, a year earlier. In the year-earlier period, Green Mountain Coffee recorded a one-time gain of 10 cents a share for the sale of the Filterfresh U.S.-based coffee services business. Excluding items such as expenses related to a Securities and Exchange inquiry and amortization costs, earnings in the latest period were 76 cents, up from 60 cents the year earlier.

Net sales improved 16% to $1.34 billion.

The company in November forecast upbeat adjusted earnings of 62 cents to 67 cents a share on sales growth of 14% to 18%.

Net sales from Keurig brewers and accessories were higher by 14%, while sales from the K-Cup portion packs for the coffee maker grew 21%.

Gross margin widened to 31.3% from 29.1%, mainly due to a decrease in green-coffee costs, and a decrease in warranty expense and lower sales returns--both related to Keurig brewers.

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