Jamba Misses Q2 Earnings, Rev

Zacks

Jamba Inc.’s (JMBA) second-quarter 2013 earnings of 36 cents per share missed the Zacks Consensus Estimate by a penny but surpassed the year-ago quarter’s earnings of 27 cents by 33.3%. Margin expansion was primarily responsible for the year-over-year rise in bottom line.

Total revenue in the quarter was up 1.9% year over year to $67.3 million, driven by higher franchise as well as Consumer Packaged Goods (:CPG) revenues. However, quarterly revenues were below the Zacks Consensus Estimate of $70 million by 3.9%.

Quarter Highlights

Sales at the company stores inched up 0.4% year over year to $62.8 million in the second quarter, led by improved comps and traffic. Comps at company-owned restaurants grew 2.2% with a rise of 160 basis points (bps) and 60 bps in transaction count and average check, respectively.

Franchise and other revenues (includes the franchised as well as CPG revenues) were up 27.2% year over year to $4.5 million, driven by higher CPG revenues and increased royalties. CPG revenues were $1 million as against $0.3 million in the year-earlier quarter.

Comps at franchise-operated restaurants grew 1.2% during the second quarter versus comps growth of 6.4% in the year-ago quarter. System-wide comps growth was recorded at 1.7% lower than the year-ago quarter’s comps of 5.7%.

Operating margin expanded 230 bps year over year to 9.9% on the back of higher franchisee and CPG sales.

Store Update

Jamba operates 787 stores including 492 franchised and 295 company-owned units. The company unveiled nine franchised restaurants in the domestic market and two stores at international locations. The company also launched two company-owned units in the reported quarter. In 2013, the company plans to set up 60-80 stores in the U.S. and international market. In addition, the company plans to launch 1,000 JambaGO stations.

Outlook

Emeryville, Calif.-based Jamba reiterated its guidance for 2013. The company expects company-owned comparable store sales growth of 4%-6%. Store-level operating margin is estimated to be 20%.

Our Take

After two weak quarters, this Zacks Rank #3 (Hold) company has succeeded in posting solid earnings growth in the second quarter of 2013. We are encouraged by the company’s flourishing consumer product business. Jamba’s focus on menu innovation, promotional strategies and supply chain improvement are expected to drive its traffic and sales further. However, the uncertain economy and lower consumer spending remain headwinds.

Among other restaurateurs, McDonald’s Corp. (MCD) missed on earnings but reported in-line revenues, while Dunkin' Brands Group, Inc. (DNKN) beat earnings but missed out on revenues. Another company, Buffalo Wild Wings Inc. (BWLD), was ahead of the estimates on both counts.

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