Diedrich Coffee in Red; Chairman Steps Down

Burned by its rapid expansion, Diedrich Coffee Inc. reported a $1.14-million fiscal fourth-quarter loss and announced that Martin Diedrich is stepping down as chairman.

The Irvine company, riding the wave of coffeehouse popularity, zoomed from 12 stores to 47 in the last year as it continued its expansion beyond its Orange County roots into Colorado and Texas. But, acknowledging that sales in those “noncore” markets were below expectations, the company said it would close 12 poorly performing outlets and take a $4.5-million charge against earnings in its fiscal first quarter of next year.

Diedrich, 37, whose father opened the family’s first java joint in Costa Mesa in 1972, will remain with the company, carrying the unusual title of chief coffee officer, as well as vice chairman.

He is replaced as chairman by interim chief executive Lawrence Goelman, a company director who joined management just last month following the resignation of former CEO Steven A. Lupinacci.

Goelman insisted that the company’s growth prospects remain bright. “We think the concept’s ability to travel is excellent,” he said.

The company’s loss in the fiscal fourth quarter ended Jan. 29 came despite a 53% sales jump to $5.77 million. In the year-earlier quarter, Diedrich earned $44,617 on net sales of $3.76 million.

The loss resulted from slow sales at stores in poor locations, an infrastructure that was taxed by the quick expansion, and lower-than-expected sales from a holiday catalog, he said. Goelman wouldn’t disclose which stores were slated for closure, but he indicated that some would be in the Denver area.

The company will now focus its expansion on opening kiosks and carts in malls and other high-traffic locations, he said. Diedrich will also seek retail partners interested in luring customers with coffee bars in their stores, Goelman said.

Diedrich in February announced plans to open coffeehouses in Home Savings branches. Goelman said the company will continue with that plan.