- Q3 Revenue Growth Revenue rose 3% to $122.7 million, despite a $4 million tariff impact reducing pretax income to $10.7 million.
- Global Expansion Momentum Added 24 net new stores (70% international), expanding to 651 locations across 33 countries.
- Full-Year Guidance Aiming for $500+ million revenue and 20%+ commercial revenue growth, with pretax income targeting $20 million.
- Product Diversification Success Mini beans sold 3 million units, driving 60% Q4 growth, while Glisten ($100) and licensed partnerships boost high-end appeal.
- Tariff Mitigation Projected $11 million annual tariff impact, offset by cost cuts, price increases, and a Chinese tariff rate reduction (30% to 20%).
Store Expansion and Global Presence
The company has 651 locations in 33 countries and added 24 net new experience locations in the quarter, 70% of which were outside the United States. This expansion is expected to drive future growth, with the company opening second locations in large malls like American Dream and Mall of America, which can provide leverage in lease terms and create opportunities for growth.
Diversification Strategy and Product Mix
The company discussed its diversification strategy, including the introduction of high-end products like Glisten, a limited-edition item priced at $100, and lower-end products like mini beans at $9-$10. Mini beans have been successful, with sales approaching 3 million units and a 60% increase in Q4. The company is expanding mini beans into new retailers and introducing licensed products, such as a partnership with Sanrio.
Tariff Impact and Mitigation
Tariffs are expected to impact the company by less than $6 million in the fourth quarter, and the company has guided to less than $11 million in tariffs impact for the year. A Chinese rate reduction from 30% to 20% will provide some relief. The company is working to mitigate the challenges through cost reduction, selective price increases, and promotions.
Valuation and Growth Prospects
With a P/E Ratio of 11.27 and an ROE of 38.73%, the company's valuation appears reasonable. Analysts estimate next year's revenue growth at 8.8%. The company's ability to manage expenses and drive experience and ticket value rather than relying on promotions is expected to drive future growth. The expansion into new retail environments offers thousands of doors for growth, and mini beans benefits from the company's brand equity, standing out as a quality product.