Its Stock Under $1, Diedrich Coffee Likely to Be Delisted

Shares of Diedrich Coffee Inc. fell below $1 each to their lowest point in the past year, prompting the company to announce that Nasdaq will probably remove its stock from the automated national exchange.

The Irvine specialty coffee retailer, the second-largest nationwide, has lost 78% of its value this year, including Tuesday’s 22-cent drop that left the stock at 88 cents a share at the end of the day.

The company said in a news release that in light of its closing price and prior discussions with Nasdaq officials, Diedrich believes the exchange will send a formal notice soon to begin the delisting process.

Earlier in the day, the company said that a franchise agreement to develop 50 Diedrich Coffee shops in Connecticut and various counties in Massachusetts and New York fell through.

The company, which is trying to expand through franchise agreements, has terminated previous franchise arrangements for 50 coffeehouses in the San Diego area and another 50 in Kentucky and Tennessee.

With the termination of the East Coast agreement, a total of four franchise area development agreements remain in effect. They call for the development of 214 franchised coffeehouses, but only three are operating so far.

Two of the franchise area developers have not met schedules to open new shops, Diedrich said, and the company is in discussions with them to resolve any issues.

In late September, Diedrich Coffee said it would sell some of its assets, including some company-operated coffeehouses outside Southern California, as part of an amended credit agreement with its lender, Fleet National Bank.

The coffeehouse chain was in technical violation of its lending arrangement and agreed to give half of the proceeds from the asset sales to Fleet.

Also in September, the company hired turnaround expert and 30-year restaurant industry veteran J. Michael Jenkins as its chief executive. The company has been facing huge losses from its mall-based chain of Gloria Jean’s Coffees, which it had acquired as part of an ambitious expansion strategy.

Diedrich Coffee has built its business to 381 retail locations in 38 states and 10 foreign countries. But it lost $22.4 million on sales of $74.5 million for its fiscal year ended June 28, and it lost $1.1 million for its fiscal first quarter ended Sept. 20.