Jamba Bears Fruit
Things are looking up for Jamba Juice parent Jamba (NAS: JMBA) , even if the end result is some strawberry red on the bottom line.
The lifestyle brand posted mixed fourth-quarter results last night. Revenue climbed 5% to $44.3 million, even though analysts were banking on Jamba's top line taking a dip.
We can't judge Jamba on its revenue growth these days. The company's been in the process of handing over some of its company-owned restaurants to franchisees. After transforming 147 of what are now 769 locations from company-owned outlets to franchised ones, revenue should shrink but profitability should improve as Jamba collects healthy royalties.
Why did Jamba's top line actually grow? Well, it did have an extra week this period, but one would think that analysts following the company are smart enough to know that. The real catalyst is a 5.7% spike in same-store sales. This is actually the fifth consecutive period of positive comps for Jamba, and five is a magic number in any quarterly streak because it means that Jamba's now stacking its store-level growth on top of positive results a year earlier.
Five quarters of comps is also an impressive streak because it comes just as McDonald's (NYS: MCD) and Starbucks (NAS: SBUX) have been actively promoting their smoothie beverages. Mickey D's added fruit smoothies to its McCafe menu two summers ago. Starbucks entered the smoothie market two years before that, but it has gone to expand its icy offerings from two to three.
The two retail titans aren't taking Jamba customers away. If anything, they're simply educating the market.
After posting back-to-back profitable quarters for the first time since going public in 2005, a loss was expected this time around. This is a seasonal business, and smoothie sales tend to take a hit when it's cold outside.
Last month's deal for Talbott Teas should help smooth some of that out if hot specialty tea sales take off. For now, it means that Jamba posted a net loss of $0.15 a share, nearly in line with the $0.14 a share deficit the pros were targeting.
Jamba will keep growing. It plans to develop 40 to 50 new units in the United States, along with 10 to 15 more new Jamba Juice locations internationally. Jamba's eyeing comps to grow 3% to 4% through 2012, though that may naturally prove to be low if teas or any of its other food or beverage lines grow popular.
Analysts see 2012 as Jamba's ending in the company's first annual profit. With the company's guidance calling for operating margins to clock in between 19% and 22% and general and administrative costs to hold steady, a profit is just what it will probably produce. It's time to clean that strawberry red from the bottom line.
Blended just right
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At the time this article was published The Motley Fool owns shares of Starbucks. Motley Fool newsletter services have recommended buying shares of McDonald's and Starbucks, as well as writing covered calls on Starbucks. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.Longtime Fool contributor Rick Munarriz calls them as he sees them. He does own shares in Jamba. Rick is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.
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