Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR) is the Rodney Dangerfield of coffee stocks.
Just as Dangerfield crafted an ironically lucrative career telling people that he doesn’t get any respect, the company behind the Keurig single-cup brewing system is still getting dissed even though the shares have more than tripled since bottoming out this past summer.
The latest slam came over the weekend as Barron’s Andrew Bary suggested that Warren Buffett may want to consider snapping up Bed Bath & Beyond Inc. (NASDAQ:BBBY). In dismissing the recent same-store sales weakness at the home-goods retailer — up just 1.7% in its fiscal quarter ending in November and pegged to grow between 2% and 4% in the quarter that just ended last month — Bary argues that the K-Cup company may be to blame.
One reason for weaker sales could be flagging interest in Keurig coffee makers made by Green Mountain Coffee Roasters. Bed Bath is a major seller of them.
Are you getting that? There’s flagging interest in Keurig brewers, and that’s why Bed Bath & Beyond is doing so poorly.
Well, let’s fact-check that salvo.
Back to School
Bed Bath & Beyond Inc. (NASDAQ:BBBY) net sales in its November quarter were crummy. Net sales did climb 15%, but 79% of that growth was tied to the June acquisitions of Linen Holdings and Cost Plus. Back out those purchases and organic growth at the namesake chain rose a mere 3% as a result of meager expansion and the 1.7% increase in comps.
By that math, Green Mountain must be doing lousy if “flagging interest” is dragging down Bed Bath & Beyond’s performance.
It’s not, but don’t take my word for it.
Bed Bath & Beyond Inc. (NASDAQ:BBBY) and Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR) don’t have the same fiscal calendar, but we do know that net sales rose 16% during the holiday quarter ending in December and that Green Mountain’s target net sales growth of 15% to 20% for the entire fiscal year that ends in September. Nothing there seems to match the 3% organic growth at Bed Bath & Beyond during the November quarter of what will likely be net sales growth of less than 5% during the quarter that just ended.
One can argue that Bary did specify brewers — not the popular K-Cup refills — but that doesn’t hold up, either. Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR) sold a record 4.95 million Keurig brewers during the holiday quarter, 18% more than it did a year earlier.
Green Mountain investors should be used to this by now. Despite its stellar growth and even its recent buoyant appreciation, the company that owns the single-serve brewing market is often talked down in its own niche.
Remember when the introduction of Starbucks Corporation (NASDAQ:SBUX)‘s Verismo was supposed to cool Keurig’s popularity? Well, the Verismo rollout last year didn’t dissuade Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR) from sticking to its 15% to 20% net sales growth trajectory. Brewer sales were up 14% and K-Cup sales were up 21% in Green Mountain’s latest quarter.