Jamba Juiced

Which came first: The "puff" press release, or the disappointing "hard" news on earnings?

Naturally, the former. But at least Jamba Juice (NASDAQ:JMBA) didn't bury its lead. Before releasing first-quarter earnings yesterday, the company softened up the market with a co-marketing announcement with Nestle (OTC BB: NSRGY), in which the two companies will work together to sell a half-dozen ready-to-drink versions of Jamba's real fruit juices and smoothies at retailers such as Target (NYSE:TGT), Safeway (NYSE:SWY), Walgreen (NYSE:WAG), and Kroger (NYSE:KR) subsidiary Ralph's.

The bad news
Only later in the day -- eight hours later, to be precise -- did Jamba give us the bad news: Q1 earnings weren't so hot. Although Jamba managed to move 13.6% more product this year than last, it did so entirely by virtue of opening new stores. Meanwhile, at existing stores, same-store sales dropped 4.2%, with California stores in particular taking a sizable 5.6% hit to comps. Incidentally, I wonder whether Jamba's news will dim Lifeway's (NASDAQ:LWAY) enthusiasm for its new Starfruit Cafe initiative. This idea of healthy-drinks restaurants isn't as much of a lock as some thought it would be.

The thing about opening stores is that it costs money. In Jamba's case, it cost shareholders $0.12 in per-share losses and reversed the year-ago $0.20-per-share profit. And that's not even the worst of it. Operating losses for the quarter totaled $19.6 million, but the net loss was helped by a "gain from derivative liabilities of $5.6 million."

"Derivative liabilities?"
Yeah. I'm not exactly sure what Jamba means by that, either. But I don't really care. Parsing the accounting-speak just doesn't interest me when you can more easily get the straight story from reading a company's cash flow statement. And although Jamba conveniently forgot to include this statement in its earnings release, I think it's safe to assume the news there -- once it appears in the 10-Q filing -- won't be good.

Why not? Well consider this: Last year, Jamba burned through nearly $40 million in free cash flow. Yesterday, CEO Paul Clayton explained that he laid off roughly 53 team members in hopes of bringing down general and administrative costs. He further announced the planned closure of 10 stores and proposed termination of leases for seven unopened stores -- moves that will also contribute to improved cash flow. Does that sound to you like Jamba's cash flow picture improved in Q1?

Nope. Doesn't sound that way to me, either.