Jamba's 1Q Loss Wider than Expected

Zacks

Jamba Inc. (JMBA) reported a loss of 2 cents per share in the first quarter of 2013; a penny wider than the Zacks Consensus Estimate but a cent lower than the year-ago quarter’s loss. Lower costs and higher top-line was primarily responsible for the bottom line improvement during the quarter.

Total revenue in the quarter was up 3.8% year over year to $55.1 million, buoyed by higher comparable store sales (comps), improved franchise as well as Consumer Packaged Good (:CPG) revenues, unit openings and menu innovation. Quarterly revenues outperformed the Zacks Consensus Estimate of $54 million by 2.0%.

Quarter Highlights

Sales at the company stores surged 2.2% year over year to $51.1 million in the first quarter with higher comps and traffic growth. Comps at company-owned restaurants grew 3.6% with a rise of 130 basis points (bps) and 230 bps in transaction count and average check, respectively.

Despite a 0.9% decline in comps at franchise-operated restaurants, franchise and other revenues (including the franchised as well as CPG revenue) were up 29.6% year over year to $3.9 million. The increase in the revenue was attributed to an increase in the number of franchised restaurants and higher CPG revenue.

Jamba’s operating loss as a percentage of revenue was narrowed 70 bps year over year to 2.4% due to top-line improvement.

Store Update

Jamba operates 779 stores, of which 479 were franchised and 300 were company-owned. In 2013, the company plans to set up 60-80 new stores in the U.S. and international market. In addition, the company plans to launch 1,000 JambaGO stations.

Outlook

Emeryville, CA-based Jamba reiterated its guidance for 2013. The company now expects company-owned comparable store sales growth of 4%-6% and restaurant operating margin of 20%.

Our Take

Jamba continues to focus on innovating new brands, advertising programs and product extensions to drive its traffic and sales. The company expects that its newly-launched BLEND Plan 3.0 would further drive earnings growth in 2013 by increased efficiency and better cost control.

However, narrower-than-expected loss reflects that the company is turning around at a slow pace. Moreover, the uncertain economy and sluggish industry sales remain headwinds.

Jamba currently carries a Zacks Rank #3 (Hold).

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