) third-quarter 2013 earnings of 15 cents per share missed the
Zacks Consensus Estimate of 18 cents by 16.7% and the year-ago
quarter's earnings of 21 cents by 28.6%. Earnings in the quarter
were under pressure due to lower top line and reduced margin.
Total revenue in the quarter was down 6.3% year over year to
$61.4 million owing to the decline in company sales and lower
comps. Quarterly revenues were also below the Zacks Consensus
Estimate of $62 million by nearly 1%.
Owing to the uncertain economic environment, the company has
witnessed a dip in consumer sentiment in the third quarter which
weighed on the company's overall performance. Cash-conscious
customers are either dining at home or spending less per meal.
Government budget cuts, high tax rates and still-tightened credit
availability seem to be the reasons behind lower consumer
spending. Adverse weather in some major markets also seems to be
responsible for such disappointing results in the third
Sales at the company stores dropped 7.6% year over year to
$57.1 million in the third quarter due to lower comps. Comps at
company-owned restaurants were down 5.5% resulting from 880 basis
points (bps) fall in traffic which offset a 330 bps rise in
average ticket. Comps in the quarter were mostly affected by low
consumer spending, inclement weather in major markets and stiff
competition. Failure of some marketing campaigns has also been
held responsible for such lower sales results.
Franchise and other revenues (includes the franchised as well
as CPG revenues) were up 15.8% year over year to $4.3 million,
driven by increased royalties. CPG and JambaGO revenues were $0.8
million as against $0.7 million in the year-earlier quarter.
Comps at franchise-operated restaurants declined 1.3% during
the third quarter versus comps growth of 1.0% in the year-ago
quarter. System-wide comps were down 3.4% as against the year-ago
quarter's comps growth of 2.5%.
Operating margin decreased 150 bps year over year to 5.4% due
to lower top line.
Jamba operates 849 stores including 517 franchised and 287
company-owned units. The company unveiled 26 franchised
restaurants in the domestic market and three stores at
international locations. During the quarter, the company
introduced JambaGO machines in 1000 markets thus, bringing the
total number of JambaGO served locations to 1,800. The company
plans to set up 60-80 stores in the U.S. and international market
in 2013 as well as in 2014. The restaurateur is also intends to
add JambaGO station in another 1,000 new locations by the end of
Emeryville, California-based Jamba lowered its guidance for
2013 following the lackluster third-quarter results. The company
expects company-owned comps to be flat to up 1% as against the
comps growth of 4%-6%.
Store-level operating margin is estimated to be 16%-17%, down
from 20%. Operating margin was guided in the range of 1% to 2%,
down from the prior expectation of 2.5%-3.0%.
The company has posted lower-than-expected results in the past
three quarters due to uncertain economy and lower consumer
spending. A lower outlook for 2013 reflects that the company has
a long way to go before its business boosting initiatives yield
Jamba holds a Zacks Rank #4 (Sell). Some other players in the
restaurant industry which look attractive at present include
Red Robin Gourmet Burgers Inc.
Cracker Barrel Old Country Store, Inc.
Bob Evans Farms, Inc.
). While Red Robin holds a Zacks Rank #1 (Strong Buy), Cracker
Barrel and Bob Evans Farms carry a Zacks Rank #2 (Buy).
BOB EVANS FARMS (BOBE): Free Stock Analysis
CRACKER BARREL (CBRL): Free Stock Analysis
JAMBA INC (JMBA): Free Stock Analysis Report
RED ROBIN GOURM (RRGB): Free Stock Analysis
To read this article on Zacks.com click here.