Jamba (JMBA) Misses Estimates

Jamba Inc.’s (JMBA) second quarter 2010 earnings of 2 cents per share missed the Zacks Consensus Estimate of 6 cents, but were higher than the loss of 10 cents posted in the prior-year quarter.

The top line of the company continues to struggle with consolidated revenues falling 10.9% year over year to $74.1 million and recorded below the Zacks Consensus Estimate of $75.0 million as well. Sales at company-operated restaurants were down 11.5% to $72.3 million, due to reduction in a number of restaurants in operation at the end of the quarter compared with the prior-year quarter. However, Franchise and other revenues grew 20.3% to $1.8 million, fueled by an increase in royalties related to the increase in the number of franchise stores.

Jamba experienced a drop in its company-owned comparable store sales, which declined to 2.4% in the reported quarter as compared with 13.7% in the year-ago quarter. However, comparable store sales are improving from last five quarters and were up 90 basis points (bps) sequentially.

For the quarter under review, cost of sales declined 11.3% to $17.1 million, labor costs dipped 15.6% to $21.4 million and occupancy costs fell 7.7% to $9.4 million, but store-operating expenses rose 0.9% to $9.9 million.

Depreciation and amortization expenses declined 19.7% to $3.5 million, but general and administrative expenses increased 14.4% to 9.4 million. As a result, the company posted an operating income of $1.7 million versus an operating loss of $1.7 million in the prior-year quarter.

Consolidated adjusted EBITDA dipped 31.5% year over year to $6.1 million. Adjusted Store level EBITDA declined 9.6% to $15.5 million, as75.0% of restaurants are located in California, which is facing the brunt of the economic slowdown. These markets have a high unemployment rate, and thus traffic has thinned out as budget-constrained consumers are opting for lower-priced dining options.

Financial Position

The balance sheet of the company is solid with cash of $34.3 million and no debt at the end of quarter. During the quarter, capital expenditures were $2.8 million.


Based inEmeryville, California, the company expects comparable store sales to be in a range of negative 3% to flat year over year in fiscal 2010 and store level EBITDA margins to be in a range of 15%-17%.

Jamba’s transition to a more franchise-centric model should reduce its capital employed and stabilize cash flow generation. Currently, 58.0% of total units are company-owned. Jamba expects to launch 30 to 50 new franchise units in fiscal year 2010. After achieving this target, the company will have approximately 60% franchised and 40% company-owned stores.

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