Teavana Holdings Inc. (TEA), a retailer of premium, loose-leaf teas, fell the most since its initial public offering in July after saying its deal to buy Teaopia Ltd. will dilute earnings by two cents a share in the second quarter.
Teavana tumbled 18 percent to $13.78 at the close in New York, for the biggest drop since its market debut on July 28. The stock, which has fallen 27 percent this year, was the fourth-worst performer in the Russell 2000 Index (RTY) today.
Teavana announced its agreement to buy Teaopia, a tea retailer based in Canada, in April, and expects to complete the $26.9 million purchase in the quarter ending July 31. The estimated dilution excludes transaction and integration expenses of three cents a share, according to a statement today. The acquisition will be neutral to earnings per share in the fiscal year ending in January 2013 as a whole, Atlanta-based Teavana said.
Teavana plans to “raise average sales per store at Teaopia closer to the Teavana average,” Andrew Mack, Teavana’s chairman and chief executive officer, said on a conference call. “We expect to reduce this revenue gap through a combination of introducing our exclusive products and merchandising strategy along with bringing the talent of Teaopia’s employee base through our training and sales process.”
Second-quarter profit excluding the deal’s effect will be a much as 3 cents a share, the company said. That’s in line with the average analyst estimate, according to data compiled by Bloomberg. Sales excluding the effect are expected to be $38 million to $40 million, the company said. That compares with an average analyst estimate of $41.5 million, according to the data compiled by Bloomberg.
Teavana expects an increase in the quarter in comparable sales, “including e-commerce, in the low to mid-single digit range,” the company said in the statement.
The company, which had 200 stores at the beginning of the year, will add 106 locations by the end of the year, in part through the Teaopia purchase, Mack said on the conference call.
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