Diedrich’s $2.3-Million Loss Is Fifth Straight

Diedrich Coffee Inc. reported a $2.3-million fourth-quarter loss, its fifth straight losing quarter, but said Wednesday that improved operations at its coffee houses and a new financial partner have prepared it for a national expansion.

The loss, about 42 cents per share, was double Diedrich’s year-earlier loss of $1.1 million, or 21 cents per share. Quarterly revenue fell from $5.8 million a year earlier to $5.7 million, reflecting the fact that the high-end coffee retailer was operating seven fewer retail stores this year.

For the fiscal year that ended Jan. 29, Diedrich reported a loss of $9.1 million, or $1.69 per share, compared with a loss of $986,000, or 22 cents per share, the previous year. Annual sales rose 16% to $23 million from $19.8 million.

Diedrich attributed the loss to $5.6 million in restructuring costs and the expense of hiring new managers under its new chairman, former Taco Bell Corp. Chairman John Martin, and its new chief executive, Tim Ryan.

The company got a boost this week when Franchise Mortgage Acceptance Corp. agreed to provide $6.3 million in capital to launch Diedrich’s national expansion. Franchise Mortgage also will provide mortgages to Diedrich franchises.

Ryan said the new financial muscle is complemented by improvements in operations: fewer long waits in line, more consistent coffee quality and better-trained and more attentive employees. Sales at stores open more than a year, a key measure of performance, edged up 0.5%.

Diedrich operates 36 coffee houses in California, Texas and Colorado. It intends to add 15 to 20 franchise groups over the next five years, each with 75 coffeehouses and 50 carts at offices, airports, colleges and stadiums.

“Starbucks has proved this is a national product, not a regional one,” Ryan said. “We think there is a lot of room for expansion--a lot.”

The financial results were released after the close of trading Wednesday. Diedrich shares closed unchanged at $7.25 on the Nasdaq.