Jamba Remains on Growth Trajectory

Zacks Equity Research

Jamba Juice Company, a subsidiary of Jamba Inc. (JMBA), recently announced the opening of a new franchised store in Indiana. This new store marked the company’s second opening with franchise company, Blended Blessings LLC. LaPhonso Ellis, a former NBA star, is the principal of this franchise company.

The new Jamba store is located in University Park Mall- a shopping mall in Mishawaka, a twin city of South Bend in St. Joseph County, Indiana and is owned by Simon Property Group. The mall offers a lot of choices for shoppers and this new store is expected to benefit immensely from its strategic positioning.

The first store was opened by the franchise in the South Bend, Indiana market and it remains committed to the expansion of Jamba Juice stores in Indiana. The franchise plans to open four additional units in and around Indianapolis, Indiana by 2016.

Indiana is located in the Mid-western and Great Lakes regions of North America. Indianapolis is the largest and the capital city of Indiana. The state has a diverse economy with several metropolitan areas and a number of smaller industrial cities and towns. The promising restaurant industry in Indiana acts as a major driving force to the U.S. economy. In 2012, total revenue from the restaurant sector in Indiana is projected to be around $8.8 billion.

We believe that the new store opening is in line with the company’s expansion strategy through franchising. We also 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 780 stores, will continue to focus on expansion and expects to sign more franchise agreements in 2012 that will expand its brand presence in the U.S. market. In July, the company signed eight new franchise development agreements that will broaden its presence in the central and eastern regions of the U.S., adding a total of 32 stores over the next five to seven years. For 2012, Jamba plans to open 40–50 new stores in the U.S. locations and 15 new stores internationally.

We are impressed with Jamba’s slow-but-steady turnaround. Besides the domestic market, Jamba is also expanding in the overseas market. Over the past 18 months, Jamba has opened 30 franchised locations in international markets -- including 20 smoothie shops in South Korea, 7 stores in Canada and 3 in the Philippines. Jamba expects to open around 320 stores internationally in the next 10 years in partnership with its current international franchise partners.

Emeryville, California-based Jamba owns and franchises Jamba Juice stores and also operates as a restaurant retailer of specialty beverages and various food products across the globe. As of July 3, 2012, it had 783 stores, including 305 company-owned and operated stores and 448 franchise-operated stores in the United States, as well as 30 stores on the international front.

Jamba, which competes with the likes of Starbucks Corporation (SBUX) and Caribou Coffee Company Inc. (CBOU), carries a Zacks #5 Rank, which translates into a short-term Strong Sell rating. Our long-term recommendation for the stock remains Underperform.

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