UPDATE 2-Peet's Q2 profit beats Street

* Q2 EPS $0.26 vs est $0.22 * Q2 rev up 5 pct * Ups lower end of 2009 EPS outlook range

* Enters licensing pact with Godiva Chocolatier (Adds details, conference call comments)

July 28 (Reuters) - Peet's Coffee & Tea Inc (PEET.O) reported a quarterly profit that beat market estimates, boosted by tighter cost controls and higher sales at its specialty business, and it raised the lower end of its full-year earnings outlook range.

Peet's also said it entered into a licensing agreement with privately held Godiva Chocolatier Inc to sell and distribute Godiva brand coffees in supermarkets.

On a conference call with analysts, the company said it expects Godiva coffee line to have an incremental impact on earnings in the next several years.

However, Godiva coffee will not have a material impact on sales or profit this year as early progress in fourth-quarter sales will likely be offset by start-up expenses.

"Godiva will have a lower margin to begin with than the Peet's system," the company said.

For the full year, the premium coffee seller sees earnings of 97 cents to $1.00 per share. It had earlier expected 94 cents to $1.00.

For the second quarter ended June 28, net income rose to $3.4 million, or 26 cents per share, from $3.0 million, or 21 cents per share, last year. Revenue rose 5 percent to $73.6 million.

Analysts were expecting the company to earn 22 cents a share on revenue of $74.3 million, according to Reuters Estimates.

Specialty net revenue rose 4 percent to $24.7 million. Within the specialty business, grocery sales grew 9 percent.

LOWER COSTS

Cost of sales and related occupancy costs decreased as a percentage of net revenue to 44.8 percent, compared with 46.0 percent last year.

"The decrease from last year was due to lower shipping costs, effective cost controls in the plant and retail stores, higher prices in retail and grocery, and lower milk costs," Peet's said in a statement.

Operating expenses also dropped as a percentage of sales to 34.8 percent, from 35.2 percent a year earlier.

The Northern California-based company, whose coffee was carried by about 8,400 grocery stores at the end of the quarter, is a smaller rival to Starbucks Corp (SBUX.O) and competes with Green Mountain Coffee Roasters Inc (GMCR.O) among others.

Shares of the company closed at $27.25 Tuesday on Nasdaq. (Reporting by Viraj Nair in Bangalore; Editing by Deepak Kannan)