Jamba's Fruity Turnaround

Blenders aren't the only things bearing fruit at Jamba (Nasdaq: JMBA  ) . The chain of fruit smoothie beverages came through with better-than-expected results last night.

Revenue fell by 21%, to $58.9 million, but don't panic. Analysts had been targeting a 24% top-line slide. As part of its refranchising initiative, Jamba has been transferring company-owned stores to franchisees. The end result should be chunkier margins at the expense of meaty revenue.

The move is working, as profitability more than doubled to $0.05 a share. Wall Street had figured Jamba would earn only $0.03 a share during the quarter.

Jamba is clawing its way back to popularity, posting a 2.9% increase in systemwide comparable sales. Its company-owned stores have now posted positive year-over-year comps in three consecutive quarters, while its franchised locations bumped the streak up to four quarters.

Not everything is peaches and soy milk. The store count could use one of the chain's signature energy boosts. There are now 746 Jamba Juice stores out there, but it opened just two net new stores during the period domestically (as five company-owned stores opened, but three locations were shuttered). Its Korean master developer did open four new outlets in South Korea.

It's refreshing to see that Jamba isn't fading away just because Starbucks (Nasdaq: SBUX  ) and McDonald's (NYSE: MCD  ) are now promoting their premium fruity beverages. Dunkin' Brands (Nasdaq: DNKN  ) and Yum! Brands' (NYSE: YUM  ) Taco Bell are also offering premium frozen beverages with fruit flavors.

All of these outlets armed with blenders or slush machines aren't slowing Jamba down. In fact, Jamba's turnaround in comps began shortly after the rollout of McCafe smoothies began last summer.

This remains a highly seasonal business. Jamba should have another strong current quarter during the summer, followed by the year's two challenging quarters. The refranchising efforts should smoothen some of that, but if the company continues to keep its corporate overhead in check and patrons continue to take to its broadened food and beverage offerings, this may finally be the turnaround that Jamba investors have been waiting on.

Have you tried a McDonald's, Jamba, or Starbucks smoothie? What did you think? Share your critique in the comments box below.

The Motley Fool owns shares of Starbucks and Yum! Brands. Motley Fool newsletter services have recommended buying shares of Starbucks, McDonald's, and Yum! Brands. 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 is about a 10-minute walk to a Jamba Juice, making that trek often. He does own shares in Jamba. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.


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