# Second Cup Ltd. (SCU.TO)



## jamesbe (May 8, 2010)

OUCH! I just lost a ton load of money this morning? Dividend drop from .15 to .08 a share and sales were flat. But wow did it ever get hard.

I suspect overtime it will climb back up, but going to take a while unless people start grabbing it at $6 that it is now which seems like a good deal.


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## ddkay (Nov 20, 2010)

There's so many new coffee shops popping up these last few years, seems like a really tough business to be in, just like restaurants I guess


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## Toronto.gal (Jan 8, 2010)

The div. decrease should have been expected given its high yield of 10%, and relative weak stock performance. 

The markets, however, have show us worse drops than -20%.

Sorry for your losses jamesbe.


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## Hawkdog (Oct 26, 2012)

ouch, thats an ugly graph!


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## doctrine (Sep 30, 2011)

I wouldn't go to Second Cup.. in fact the only coffee store that I know I frequent on a regular basis, as well as most of my friends, at equal or greater frequency in which we frequented 10 years ago, is Tim Hortons. They're really the only coffee house I would consider as an investment.


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## ddkay (Nov 20, 2010)

Tim Hortons sucks. Second Cup are competing with higher end stuff like Lettieri, Starbucks and other non-chain specialty shops. For example you would go to Balzac's if you wanted to sit in a European setting without being surrounded by 14 people on Macbooks writing script plays (they don't have wifi). In Toronto we have Dark Horse Espresso Bar, Jet Fuel, Bulldog, Moonbean, Balzacs, Jimmy's... the list goes on. There's seriously a lot of independent roasters popping up, some are able to command very good locations too.


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## Hawkdog (Oct 26, 2012)

wow sacrilege, saying Timmy's sucks.
Timmy's is a gold mine whether you think it sucks or not. I don't go that often, mostly due to the lineups.


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## ddkay (Nov 20, 2010)

I'm purely speaking as customer, there's one Tim Horton's for every letter in the alphabet within 5 minutes walking distance and they're all filthy. The only time I would consider going into Tim's again is if I survived a plane crash in some desolate area. Maybe.


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## DavidJD (Sep 27, 2009)

ddkay said:


> I'm purely speaking as customer, there's one Tim Horton's for every letter in the alphabet within 5 minutes walking distance and they're all filthy. The only time I would consider going into Tim's again is if I survived a plane crash in some desolate area. Maybe.


Word.


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## bayview (Nov 6, 2011)

I like my coffee hot, aromatic & full bodied, espeially if i have to pay for them.

At the slightly lower end, I prefer McD's over Tim's. McD's free coffee promotion last week was fantastic goodwill.

At the next level, I prefer SCU over StarBucks. At that price point, the latter's coffee doesnt meet my requirements.

I would be keen to try out some indie joints with great coffee & free wifi!


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## doctrine (Sep 30, 2011)

I don't know what the Tim Hortons are like in Toronto. I can only speak to my experience, and that is universally positive. I'm not a poor person, but I feel like the vast majority of coffee shops are a massive ripoff. Tim's isn't as cheap as it used to be, but it's the best value for money out there.


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## Freedom45 (Jan 29, 2011)

As a long-term investment, I like Tims. Regular dividend increases, steady sales, and moderate growth.

As a coffee drinker, Tims is right across the street from my office, and I prefer it over the other "cheaper" coffees (McD's, etc), so it's my "go-to." If the wife and I are having espresso based coffee, we generally hit either Sbux, or one of the independents. I generally prefer the products at the independent places, but we usually just visit whatever we're closest to when we decide we want a latte...


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## Woody (Oct 30, 2012)

SCU is continuing to drop. Could it potentially be a good buy at this price?


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## DavidJD (Sep 27, 2009)

Woody said:


> SCU is continuing to drop. Could it potentially be a good buy at this price?


I am wondering the same. It seems like they understood their situation and slashed the div rather than be too gentle and not go far enough. However, it still stands that coffee houses are a dime a dozen and independent ones have more style and better service/products than a chain. The fact that these are more and more common suggests that the simple coffee shop is much more competitive.


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## jamesbe (May 8, 2010)

Ouches!!! Down again today? Geez.

I guess I have to make the decision now if I'm just going to hold this long term or cut my losses.


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## jamesbe (May 8, 2010)

geez it's like an artery has been cut. You would think they announced that they were going belly up! Just keeps dropping like crazy.

I'm betting now it's just people cashing out in fear, come a month from now people won't realize why it was down and they will start buying it up.


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## Woody (Oct 30, 2012)

jamesbe said:


> geez it's like an artery has been cut. You would think they announced that they were going belly up! Just keeps dropping like crazy.
> 
> I'm betting now it's just people cashing out in fear, come a month from now people won't realize why it was down and they will start buying it up.


I'm willing to bet the same. They aren't doing *that* bad financially, it seems just to be a sell-off scare.


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## liquidfinance (Jan 28, 2011)

There was a discussion a few months back about Second Cup and the consensus then I believe was to say clear. A quick look at the financials showed that they hadn't been able to cover the divi payout for some time. 

Personally I wouldn't cling on to the stock on the basis that the price may recover. If you believe it will recover, good management, good growth, entering new markets, premium product then why not stick with it. But does Second Cup do any of that? The only reason I know they existed is because of Undercover Boss.


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## gibor365 (Apr 1, 2011)

Even with this drop I don't feel comfortable buying SCU.... there too many competitors THI, SBUX...even MCD... We live in Canada 12 years, never have been in Second cup and not going to go there.... 
Now they cut dividends , and , who knows, they may suspend it at all in near future....

Just wondering....how many of you have visited Second Cup?!


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## bayview (Nov 6, 2011)

Usually a div cut portends bad news unless funds are retained for imminent growth acquisitions/expansion which must be ROI accretive. The trajectory of its recent fall suggests the former!


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## jamesbe (May 8, 2010)

I don't drink coffee but we use to have a second cup in our building and it was busy beyond belief. 

I may cut my losses I'm going to look at it further. But it will rise again before it falls as they say LOL


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## bettyboop (Dec 13, 2011)

gibor said:


> Even with this drop I don't feel comfortable buying SCU.... there too many competitors THI, SBUX...even MCD... We live in Canada 12 years, never have been in Second cup and not going to go there....
> Now they cut dividends , and , who knows, they may suspend it at all in near future....
> 
> Just wondering....how many of you have visited Second Cup?!



I actually like SCU coffee better than SBUX or THI or MCD. There is one in the building where I volunteer and they are always busy, always a line, but the same can be said for MCD and SBUX. I came close to buying some SCU a couple weeks ago, now I'm happy I didn't.

I used to love timmies but the last 2 times I went there the coffee wasn't as good as it used to be and I've heard the same from others, I won't be going back.


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## HaroldCrump (Jun 10, 2009)

jamesbe said:


> I may cut my losses I'm going to look at it further. But it will rise again before it falls as they say LOL


I don't know the metrics of this specific stock, but in general, there is often a small dead cat bounce immediately following such poor earnings.

That presents a small window of opportunity for some folks to cut losses and get out.

*However*, soon thereafter, there are often analyst downgrades.
This could be the next day or the day after.
That's when it falls even further.

Analyst downgrades are sometimes even worse than the original news because many funds and institutions follow analyst ratings and buy/sell based on that (i.e. buy securities being upgraded, and sell securities being downgraded).


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## jamesbe (May 8, 2010)

After some analysis of my portfolio I've decided it's worth just holding onto it for the dividend. It's still reasonable at 8.5 cents a share. 

I don't have a huge amount of money in it, if I lose all of it, it will suck but not the end of the world.


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## gibor365 (Apr 1, 2011)

I can understand your doubts... for me it's a difficult decision to sell and take losses... and when i did it, in some cases it was good decision ex. CCO or selling CEL and buying T.N instead, in other cases it was bad decision (like selling DII)... In any case I doubt that SCU gonna be next YLO 

P.S. another thing that i don't like about SCU...they're not expanding, I live 12 years in North-West Mississauga...driving every day...I didn't see any of the Second Cup locations.... maybe they exist , but they are not attract my eye.... THI, MCD, KEG and tens of other are everywhere


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## jamesbe (May 8, 2010)

Second cup usually are inside malls, inside office buildings etc. At least around here it seems.


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## maxandrelax (Jul 11, 2012)

I don't see a good future for Second Cup. Stores in downtown Toronto in trendy areas are being shuttered and nobody I know makes a trip to get it specifically. They are all outdated stylistically... Sorry to those holding, but I don't see it surviving.


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## Sampson (Apr 3, 2009)

Its an East - West thing. Go to Vancouver and look for a Second Cup, won't be able to find a timmies.

To hold onto something "for the dividend" is a mistake, especially if FCF is not enough to cover it. Will you feel it is still a 'hold and wait for recover' when the dividend is chopped to 2 cents per share? (hypothetical scenario )


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## Woody (Oct 30, 2012)

gibor said:


> Just wondering....how many of you have visited
> Second Cup?!


I used to visit the one in St. John's occasionally, but I'm not a
regular coffee drinker. The one in the avalon mall was always busy and
provided a nice little 'nook' for people to chat/work in. A buddy of
mine would code their for hours and slam 6-7 coffees in the process. It
felt more like an independent space rather than the fast food style
business of Tim's & Bucks. The one I live nearby in Halifax however,
always appears to be desserted. According to a friend of mine in
Toronto, they have closed a lot of franchises and been replaced by
Bucks.

I don't expect them to do AS well as the big 2 and I think a large
number of investors are turned off by that. If they can somehow keep
that independent feel in some of their locations they may have a niche
in the market.


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## Eder (Feb 16, 2011)

I think we see $2 before $7 again...I do like their coffee...no idea why these morons don't put it in a K cup or something and at least try to run with a business plan.


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## bayview (Nov 6, 2011)

I just drink its coffee occasionally, not famiiar with SCU invt merits. I guess its retail ops are not widespread is to avoid proliferating everywhere like SBUX did in its hey days which killed it eventually. But if its is not FCF positive - bad!

BTW - anyone knows the time stamped on this Forum is based on which time zone. Earlier I noticed posts were time stamped 1 hour ahead of EST.


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## bayview (Nov 6, 2011)

Time stamp seems okay now. Must be my ageing eyes. Sorry folks.


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## HaroldCrump (Jun 10, 2009)

bayview said:


> BTW - anyone knows the time stamped on this Forum is based on which time zone. Earlier I noticed posts were time stamped 1 hour ahead of EST.


As far as I can tell, CMF timestamps are EST.
Keep in mind that this past weekend, we reverted to Standard time i.e. 1 hr. less than DST.


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## bengrahham (Apr 26, 2013)

*Another Dividend Cut?*

The business seems to be in freefall on all metrics (sales per store, royalty % declines, average cheques, profitability, etc.)

The cutting of the dividend again seems to be most likely. At this rate of degradation the business won't be generating enough money for both rejuvenating the brand/company and the current payout level within a few months, especially during the summer drink-wars which the company has been losing more and more every year to competitors that aren't run by monkeys.

I've also heard fairly credibly 'whispers' on the Street that the Board considered a harsher dividend cut initially but decided to wait to see how the next few quarters would play out, given how bad the business was faring, and opted for a two-stage dividend cut with one initially and the other on the back of poorer results.

Anyone hear anything different?

This business also has negative tangible book equity, so in liquidation things could get ugly, very fast.


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## marina628 (Dec 14, 2010)

Nice 15% jump in the price this morning


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## Pano (Oct 16, 2012)

Been keeping an eye on this one for quite awhile. Glad I never got into it but wondering if there is a turn around coming?

It's a very nice shop downtown and can snag people away from Starbucks


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