UPDATE 2-Online sales, store growth to drive Teavana profit

Fri Sep 2, 2011 11:42am EDT

* Q2 EPS $0.03 vs $0.02 last year

* Q2 sales up 36 pct to $31.3 mln

* Sees FY EPS $0.42-$0.44

* Sees FY sales $160-$164 mln

* Shares fall as much as 9 pct (Adds outlook direction, shares, international expansion, investor comment)

By Ranjita Ganesan

Sept 2 (Reuters) - Specialty tea retailer Teavana Holdings Inc expects strong online sales and new store openings to drive growth this year and is now eyeing lucrative international markets after going public in July.

The company's shares, however, fell as much as 9 percent on Friday amid broader market worries. The S&P 500 and the Dow Jones index were both down about 2 percent. The company, founded in 1997, saw its shares surge as much as 73 percent on their market debut.

"Two months ago, the market would definitely have liked the numbers much more," said Josef Schuster, founder of IPO investment firm IPOX Schuster LLC, which owns Teavana shares.

"But now the absence of a lot of risk-taking has in a sense reflected in the stock being down," Schuster said, referring to the recent volatility in the stock market.

The company has been opening new stores and growing its e-commerce business, as well as looking to expand into new markets, to drive sales.

On Friday, the company also signed a 10 year franchise deal with Alshaya group, a franchise operator known for developing the Starbucks Corp and American Eagle Outfitters chains in the Middle East.

Alshaya will develop Teavana stores in Bahrain, Kuwait, Saudi Arabia, Qatar, United Arab Emirates, Egypt, Lebanon and Jordan.

Teavana is currently present only in the United States and Mexico but hopes to broaden its footprint elsewhere through both franchise-run as well as company-owned stores, particularly in Canada.

The Atlanta, Georgia-based retailer, which sells more than 100 varieties of premium loose-leaf teas, plans to open about 17 new stores by the end of the year, bringing its store count to about 196 stores.

For the full year, Teavana expects a profit of $16-$16.8 million, or 42-44 cents a share, compared with $5.3 million, or 53 cents a share, last year.

The company projected sales of $160-$164 million for the year, compared with $90.3 million last year.

Second-quarter net profit rose 72 percent to $1.0 million, or 3 cents a share. Sales jumped 36 percent to $31.3 million while same-store sales, including e-commerce, rose 8.7 percent.

Teavana's shares hit a low of $23.52 on Friday on the New York Stock Exchange. (Reporting by Ranjita Ganesan; Editing by Viraj Nair)

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