Jamba Is Ready for Investors to Drink Up

It took a few years, but Jamba Juice parent Jamba (Nasdaq: JMBA  ) is finally starting to get its blended act together.

The smoothie chain posted better-than-expected results last night. Revenue fell 14% to $57.1 million, but that's part of the company's refranchising efforts. Jamba has spent the past two years handing over company-owned stores to franchisees, resulting in lower top-line results but a steadier flow of high-margin royalties. Jamba's net income clocked in at $4.1 million or $0.05 a share, reversing a small loss during last year's third quarter.

Analysts figured that Jamba would only earn $0.03 a share on $56.6 million in revenue. This is the first time since going public in 2005 that Jamba has scored back-to-back profitable quarters.

Investors can't get greedy. This is a seasonal business, and a quarterly deficit is likely for the current quarter as chilly weather makes a refreshing smoothie less tantalizing as a beverage option.

Same-store sales were up 3.3% at company-owned stores during the period, making it Jamba's fourth consecutive quarter of positive comps. Traffic itself was roughly flat. The gain here is a combination of a recent price hike and customers buying more non-smoothie items. Jamba's been trying to drum up ways to increase the attachment rate of its customers, adding a broader line of baked goods, oatmeal, flatbreads, and other items that are logical purchases alongside its signature blended treats. It has been successfully testing frozen yogurt at many of its California stores to beef up traffic later in the day, and plans to expand that offering next year.

International expansion is also moving along nicely. A Canadian partner opened its first store in Toronto last month, and its South Korean partner opened four more locations during the quarter. Jamba's also inking new retail licensing deals, taking advantage of its healthy active lifestyle brand in bottom line-padding agreements.

Jamba knows that it's not the only accessible smoothie chain out there. Starbucks (Nasdaq: SBUX  ) and McDonald's (NYSE: MCD  ) now sell premium fruity beverages. Dunkin' Brands (Nasdaq: DNKN  ) and Yum! Brands' (NYSE: YUM  ) Taco Bell are also offering premium frozen beverages with fruit flavors. However, none of these chains offer the wide menus and functional boosts that Jamba and other dedicated smoothie shops can offer.

As the Jamba empire grows -- now at 762 stores and counting -- the beverage retailer is starting to become the active lifestyle brand that it always wanted to be. Year-round profitability should be its next granola-topped goal.

If you want to see how the blender whirs, follow the companies making chilled fruity beverages by adding them to My Watchlist.

The Motley Fool owns shares of Yum! Brands and Starbucks. Motley Fool newsletter services have recommended buying shares of Yum! Brands, McDonald's, and 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 the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.


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  • Report this Comment On November 14, 2011, at 6:13 PM, snootloop wrote:

    I have been a Jamba Juice investor for longer than I really want to think about. This is a simplification, but I took a large leap very early on because when I lived in southern California, I just couldn't get enough of JJ. I have lived back in Michigan for about 11 years and still not one JJ located in Michigan.

    What's my point? I don't normally hold onto major stock losers but I just feel that this company really offers a superior product and experience in its category and still has so much room for growth. I mean, you can get a JJ in South Korea but not Michigan? I guess a few more years of holding on isn't going to hurt. I just hope this management team is more Green Bay Packers than Cleveland Browns (sorry Cleveland, I can't throw my Detroit Lions under the bus).

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