Jamba in Expansion Mode

Jamba Inc. (JMBA - Snapshot Report), a highly recognized healthy, active lifestyle brand, recently announced the opening of a new franchised store in the Minneapolis area. The newly opened store marked the company’s eighth in the city.

The Emeryville, California-based company stated that the new store has been opened on Level 3 of the Mall of America in Bloomington. The Mall of America is the second largest mall in North America and offers a full range of retail, restaurant and entertainment for its shoppers. This new store is expected to benefit immensely from its strategic positioning. The shopping center attracts approximately 40 million visitors annually from all the nearby locations.

We believe that the new store opening is in line with the company’s expansion strategy through franchising. We believe that Jamba’s transition to a more franchise-centric model will involve less capital and stabilize cash flow generation.

Jamba Juice, which currently operates more than 760 stores, will continue to focus on expansion and expects to sign more franchise agreements in 2012 that will expand its brand presence in two to three new markets in the US. For 2012, Jamba plans to open 40-50 new stores in U.S. locations and 10-15 new stores internationally.

We are impressed with Jamba’s slow-but-steady turnaround. Besides the domestic market, Jamba is also in an expansion mode overseas. The countries that Jamba is currently eyeing are Korea, the Philippines and Canada.

The company is also on track to innovate a new beverage line and a value-based menu offering. Its recent deal with Bare Fruit LLC to produce three varieties of fruit chip snacks will hit the market by the end of fiscal year 2011.

For fiscal 2011, management expects comparable store sales in the range of 2% to 4% and operating margin between 18% and 20%. For fiscal 2012, Jamba foresees company-owned comparable store sales growth of 3-4% and adjusted operating margin in the range of 19-22%. Jamba currently retains a Zacks #3 Rank (short-term Hold rating). We are also maintaining our long-term Neutral recommendation on the stock.

Read the full analyst report on JMBA