Caribou Coffee Company (NASDAQ:CBOU) is in a bit of a strange spot.  It is in the formerly-hot lounge and coffee destination.  They also have the ‘sit and chill’ or ‘work on the free wi-fi’ environment that encourages spending for more than just one small cup to go.  Yet here the stock sits within flirting distance of post-IPO all time lows. 

Shares hit as low as $6.00 in July, 2006, but shares are at a 52-week low today of $6.09 and have traded as low as $6.05.  The 52-week trading range before today was $6.11 to $9.27.

Unfortunately when you go run a value scenario to compare to Starbucks (NASDAQ:PSBUX) or to Peet’s Coffee & Tea (NASDAQ:PEET), this one just stinks.  Starbucks has problems of its own that we have outlined if it wants to manage its major growth plans, and Jim Cramer just recently noted how Peet’s Coffee & Tea is a winner that can afford to go for slow growth.  There is also nothing wrong with the stores and nothing wrong with the coffee, which means that either other expenses are eating it alive or management can’t hit.  It is losing money and out of all the analysts that cover the stock none expect Caribou to be profitable for 2007 or for 2008.  That isn’t going to cut it, not one bit.

With a mere $118 million market cap, the good news is that the company trades at less than half of 2007 projected revenues.  This means that if management can figure out how to stop losing money that their valuations could actually start looking quite good.  But until they can prove it then they are just another boutique specialty coffee and food retailer that has a story they aren’t able to deliver on.   When you enter into a marketplace and can’t profitably compete against a $2.00 large cup of coffee with nothing in it, then it’s time to make some change.

Jon C. Ogg
September 7, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.