Bear of the Day: Jamba (JMBA)

by

November 07, 2013 |

Jamba Inc.'s (JMBA - Snapshot Report), through its subsidiary, Jamba Juice Company, offers delicious blended beverages, juices, and fruit smoothies. The company just reported third-quarter EPS of $0.15 cents missing the consensus of 18 cents by 16.7% and the year-ago quarter’s earnings of 21 cents by 28.6%.

Total revenue in the quarter was down 6.3% year over year to $61.4 million owing to the decline in company sales and lower comps. Quarterly revenues were also below the Zacks Consensus Estimate of $62 million by nearly 1%.

Less to Squeeze?

The company could offer a host of reasons to explain the sales and profits dip, including the uncertain economic and political environment, which may have led cash-conscious customers to spend less on eating out. Adverse weather in some major markets also seems to be responsible for such disappointing results in the third quarter.

But the bottom line for food, just like fashion, is that customers can be fickle and the competition can be fierce. With new venues like Protein Bar in Chicago offering healthy, delicious, and fast shakes, the Jamba appeal may be less juicy. And the Zacks Price & Consensus chart below shows what the analysts think of the numbers going forward...

Quarter Highlights

Sales at the company stores dropped 7.6% year over year to $57.1 million in the third quarter. Comps (same-store sales) in the quarter were mostly affected by low consumer spending, inclement weather in major markets and stiff competition. Failure of some marketing campaigns has also been held responsible for such lower sales results.

Franchise and other revenues were up 15.8% year over year to $4.3 million, driven by increased royalties. CPG and JambaGO revenues were $0.8 million as against $0.7 million in the year-earlier quarter.

Comps at franchise-operated restaurants declined 1.3% during the third quarter versus comps growth of 1.0% in the year-ago quarter. System-wide comps were down 3.4% as against the year-ago quarter’s comps growth of 2.5%. Operating margin decreased 150 bps year over year to 5.4% due to lower top line.

Store Update

Jamba operates 849 stores including 517 franchised and 287 company-owned units. The company unveiled 26 franchised restaurants in the domestic market and three stores at international locations. During the quarter, they introduced JambaGO machines in 1000 markets, bringing the total number of JambaGO served locations to 1,800.

The company plans to set up 60–80 stores in the U.S. and international market in 2013 as well as in 2014. They also intend to add JambaGO stations in another 1,000 new locations by the end of 2014.

Outlook

Emeryville, California-based Jamba lowered its guidance for 2013 following the lackluster third-quarter results. The company expects company-owned comps to be flat to up 1% as against the comps growth of 4%–6%.

Store-level operating margin is estimated to be 16%–17%, down from 20%. Operating margin was guided in the range of 1% to 2%, down from the prior expectation of 2.5%–3.0%.

This outlook made it easy for analysts to slash their growth estimates. So, while the store growth and innovation in the form of JambaGO stations are impressive, we need to see the earnings estimates turn back up before we can get excited about this juicy story again.

Kevin Cook is a Senior Stock Strategist for Zacks where he runs the Follow The Money portfolio.

Email Print Share Rate Pos Rate Neg