Consistent with its disciplined cost management,
) recently inked a supply chain distribution agreement with Systems
Services of America (SSA) to render services in the West Coast of
the United States. Notably, Systems Services of America is one of
America's most innovative chain account distributors running four
western distribution centers and catering to nine western states.
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Jamba continues to be active with its supply chain management and
plans to improve customer experience as well. Last year, Jamba
formed another alliance with US Foods for service in northeastern
These partnerships endow Jamba with superior supply chain
management as well as consolidate distribution channels for speedy
and timely services to the company's existing and new outlets.
Expansion in new geographic areas will also be facilitated through
California-based Jamba also aims to reduce costs through these
alliances. Jamba's stringent cost structure has already improved
the co operating margin considerably. The company continues to be
under pressure due to commodity inflation, but has been able to
mitigate this by leveraging a strong supplier relationship and
implementing cost-saving initiatives.
We believe Jamba is turning around at a slow but steady pace.
However, in the second quarter, the company recorded earnings per
share of 5 cents, on a reported basis, showing no improvement on a
year-over-year basis. Hence, amid a lackluster economy where
consumers refrain from dining out frequently, Jamba has correctly
identified cost containment initiatives as the trick to expedite
For 2012, Jamba expects adjusted operating profit margin in the
range of 20-23%. The company's general and administrative expenses
in 2012 will also be consistent with 2011 levels, excluding the
performance compensation and delivery of CPG licensing revenue of
around $3 million.
However, Jamba will likely face stiff competition from
) in the West Coast market as the latter plans to open a juice
manufacturing unit in Rancho Cucamonga, California toward the end
of fiscal 2013. This new facility will enable Starbucks to spread
the Evolution Fresh products in the West Coast and is likely to aid
its plans to expand in the east.
Jamba currently carries a Zacks #3 Rank, which translates into a
short-term Hold rating. We are also maintaining our long-term
Neutral recommendation on the stock.