NEW YORK (AP) -- Shares of Peet's Coffee & Tea Inc. fell Friday after an analyst cut his forecast for the company's second-quarter profit, citing weaker-than-expected grocery sales.
THE SPARK: Baird Equity Research analyst David Tarantino trimmed his forecast to 28 cents per share, down 2 cents from his previous estimate. He noted that sluggish grocery sales in recent months were likely due to aggressive price discounts by Starbucks. Tarantino now expects grocery sales to grow 5 percent, down from his previous estimate of 14 percent.
But he noted that the company's revenue can grow in the second half the year and in 2013 in part because of falling coffee costs.
Peet's, based in Emeryville, Calif., gets more than half its revenue from its coffee shops and the rest from grocery sales, home delivery and sales to food service and offices.
Separately, Starbucks said earlier in the week that it planned to open its first Tazo tea shop near its Seattle headquarters. Although it has no plans for additional stores yet, the coffee giant noted that Tazo is one of the brands it hopes to grow.
THE ANALYSIS: Tarantino said Peet's grocery sales should soon start picking up, as its own promotions and new packaging come into play and the discounts by Starbucks run their course. He anticipated "robust growth" for 2013 and 2014, citing lower coffee prices, and kept his "outperform" rating on the company.
SHARE ACTION: The stock was down $2.67, or 4.5 percent, at $57.02 in afternoon trading. They are down 26 percent from their late March high of $77.60 and are now approaching their 52-week low of $51.16 set last September.
