) dropped 18.78% to $10.94 per share as of Oct 8, 2013 on a muted
business outlook for fiscal 2013. The restaurant chain lowered
its full year guidance on Oct 7 to reflect cautious consumer
spending, inclement weather in major markets and stiff
competition, all of which weighed on sales.
This retailer of specialty beverage and food offerings now
expects system-wide same store sales to be flat to up 1%.
Store-level margins are expected to be in the range of 16% to
17%, lower than its prior expectation of 20%. Operating margin
was guided in the range of 1% to 2%, down from the prior
expectation of 2.5%-3.0%.
Following the reiteration of the guidance for 2013 at the
second-quarter earnings release on Aug 5, management noticed a
dip in consumer sentiment, which dragged down third quarter
comparable store sales comparisons for company stores by 3% to
Failure of some campaigns and adverse weather each adversely
affected the comparison by 1% to 2%. Preliminary results indicate
third quarter comps decline of 3.4% with a 5.5% and 1.3% drop in
company-owned comps and franchise stores, respectively.
Guidance for 2014
Management also issued a preliminary guidance for 2014. For 2014,
management expects system-wide comps growth of 2% to 4%;
store-level margin of 18% to 19% and operating margin of 2% to
3%. In 2014, the company plans to set up 60-80 stores in the U.S.
and international markets. In addition, the company plans to
launch up to 1,000 JambaGO stations.
Jamba remains committed to its expansion plans. Over 1,000 food
courts at major retailers across the country will soon have
JambaGo smoothie units. The company is expected to expand its
international presence from 4 countries at present to 7-9
countries by 2015. Potential unit count in international markets
is therefore expected to increase from 1,000 to 1,500.
Management is taking several other cost saving and sales building
initiatives to trigger comps. It is resorting to a digital system
namely ISIS mobile wallet, which allows guests to pay via phone.
It has partnered with SpendGo for a new loyalty program slated to
begin in the first quarter of 2014.
Jamba has missed the Zacks Consensus Estimate for earnings in the
first two quarters of 2013. The business environment does not
seem promising for the third quarter results as well. We
prefer to remain on the sidelines at the current level until the
company's business boosting initiatives reap benefits.
Jamba currently carries a Zacks Rank #3 (Hold). Others players in
the same industry, which look attractive at current levels
AFC Enterprises Inc.
Cracker Barrel Old Country Store, Inc.
Domino's Pizza, Inc.
), all carrying a Zacks Rank #2 (Buy).
AFC ENTERPRISES (AFCE): Free Stock Analysis
CRACKER BARREL (CBRL): Free Stock Analysis
DOMINOS PIZZA (DPZ): Free Stock Analysis
JAMBA INC (JMBA): Free Stock Analysis Report
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