ARTIGO INTERESSANTE DO SEEKING ALPHA SOBRE A JAMBA : VER AQUI .
Jamba: The Good, The Bad And The Unknown
Nov. 10, 2014 3:37 PM ET
Summary
Jamba Q3 2014 revenues of $58.28M missed by $1M and EPS of $0.03 (on a non-GAAP basis) missed consensus by $0.28. The company announced a $25M share repurchase program and reiterated its commitment to accelerate the transition to an asset-light strategy.
Positive numbers came from company-owned same-store sales, that grew 3.7% Y/Y, and juice sales.
2015 guidance calls for G&A reductions of approximately 20% and the re-franchising of 114 company stores during 1H 2015.
There was some good and some more bad news in Jamba’s Q3 report, leading to a big unknown: will management execute properly on its accelerated plan to profitability?
Last week Jamba (NASDAQ:JMBA) reported Q3 2014 numbers.
Revenues of $58.28M missed consensus by $1M, and EPS on a non-GAAP basis of $0.03 missed analysts' expectations by a large number, $0.28. GAAP EPS were a loss of $(0.10), compared to positive EPS of $0.15 in the same period of last year. Jamba is heading toward its seasonally weakest period, and a net loss of $1.7 million in what is traditionally a good summer quarter came unexpected to most investors.After announcing such negative top and bottom line results, it came almost as no surprise that the stock went down after hours, and lost more than 10% at the opening, the following day, on relatively high volume:
It is, however, amazing how quickly the stock price recovered, as if the market was trying to look beyond the main reported numbers, and trying to decipher the impact of the launch of an accelerated refranchising initiative in the California market and management's commitment to accelerate the transition to an asset-light strategy.APESAR DO MAU DESEMPENHO DE APRESENTAÇÃO DE RESULTADOS, ESPERA-SE QUE A REORGANIZAÇÃO DA ESTRUTURA DE FRANCHISING E O NOVO COMPROMETIMENTO POSSA ACELERAR A ESTRATÉGIA DA EMPRESA.
The good news
In the quarter, Jamba reported quarterly comparable store increases for both company-owned and franchise-operated units on a Y/Y basis, driven by increased momentum for the company's fresh-squeezed juice and whole food blending platform.
If we have a look at system comparable store sales over the last few quarters, we'll find that they have been positive since Q4 2010, with the only exception being Q3 2013.
As Q3 2014 directly compares with the negative 2013 performance, we won't emphasize the absolute number, but mainly notice that the recent fresh-squeezed juice and whole food blending platform seems to be getting good traction, with benefits in terms of store sales that could extend to more units going forward:
James D. White - Chairman of the Board, Chief Executive Officer and President:
"We're confident that juice is a great growth opportunity for Jamba and we are excited by the potential, especially given the impressive results to date. For example, our total juice sales from May through September have increased twofold from 7% to 15% of sales in just 5 months and a full 4x for the premium juice platform. Los Angeles is a large and important market for Jamba, and during the same time, our juice business more than doubled. We gained market share and our top competitors lost share."
According to management, Jamba has now become "the leading retailer in the country of premium fresh juices".In addition to fresh juice, the company is also launching a line of cold pressed ready-to-drink juices which, in our opinion, should represent a good fit for the company:
"We also expanded our juice presence by launching our line of cold pressed ready-to-drink juices on an accelerated schedule in the more than 300 stores in Southern and Northern California. These cold pressed juices are available only in Jamba stores and offer consumers the great taste, texture, flavor of fresh-squeezed made-to-order juices in convenient 12-ounce bottles. Since entering the market with this offering, acceptance has been very strong."
The bad news
Both top and bottom line numbers were below consensus, and our own expectations.
Even some positive numbers, like comparable store sales, when examined more carefully are not that convincing - not only because Q3 2014 compares with a very weak quarter in 2013, but because the positive number obfuscates an actual decrease in traffic:
Karen L. Luey - Chief Financial Officer, Principal Accounting Officer, Chief Administrative Officer, Executive Vice President and Secretary:
"Company same-store sales was made up of 440 basis points increase in average ticket and a decrease of 70 basis points in traffic. As we discussed in previous quarters, our promotional strategy for FY '13 was designed to drive traffic with deep discounts and promotions that occurred throughout last year. These promotional traffic-driving initiatives have been significantly reduced for fiscal '14 and we continue to see the traffic decrease narrow as we start to see the benefits of our juice platforms take hold."
At the end of September, the company had to buy 26 stores from an existing franchisee:
Pursuant to a Settlement and General Release Agreement, dated September 28, 2014, the Company acquired 26 stores, three of which were closed concurrently with the acquisition, from a former franchise partner in the Midwest for approximately $0.8 million.
The move was tactical and not strategic, and Jamba expects to refranchise these locations during 2015.
Re-franchising and cost-saving efforts accelerated: is management under pressure from an activist investor?
If we look at the recent performance by the company, we'll find that management has succeeded in the toughest part of the job (saving the company from bankruptcy), but hasn't really been able to show real progress when it comes to making the company profitable:
The presence of an activist investor, Engaged Capital, that pushed the company in the direction of cost savings and refranchising units, seems to have found some listening with the company: One option Engaged has proposed is for the company to cut costs, end its attempts to expand into new ventures and shed its unprofitable New York locations, the person said, a strategy that would squeeze some $14 million of the company's $38 million in general and administrative costs from last year.
The other potential path Engaged had floated is for Jamba to franchise many of the 263 locations that it owns, a move that would bring in cash and cut costs by freeing Jamba from the day-to-day operations of the stores, the person said.
The unknown: execution
Refranchising up to 114 locations in six months won't be an easy task. To put it into context, Jamba refranchised about 174 stores in less than three years, from May 2009 to December 2011. (42 stores in 2011, 105 in 2010, 27 in 2009).
While it is true that the company is now in a much better financial position than just a few years ago, when Jamba was struggling, and probably also represents a much safer choice for investors interested in buying some of its units, the effort remains very challenging, especially as it also seems linked to commitments to open additional shops in the next few years.114 locations also represent in excess of 40% of the existing company owned units - in other words, if Jamba could sell all of them on January 1st, as company store revenues represent almost 92% of total sales, investors would see a negative impact translating into a 35% decrease in revenues in 2015, which hardly makes a nice headline.
Same store sale increases, if achieved, and royalties from refranchised units will not certainly balance the loss of revenues from the sale of company owned units - and investors will have some fun trying to decipher revenue related data.
Here is, for example, the impact we noticed in 2011 trying to keep track of company owned SSS increases and revenues lost due to the reduction of owned units, in a year that saw relatively few refranchised shops (44 only):
The focus is obviously on profitability, at the expense of revenues.
According to management, there's a more than 50% chance of success in the refranchising effort by 1H 2015:
James D. White - Chairman of the Board, Chief Executive Officer and President:
"I guess I'd make 2 points, there's significant internal pent-up demand in our existing franchise systems, so those discussions are always kind of ongoing. And we have also seen significant interest outside of our current network for bigger packages. So we have a high degree of confidence that I'd score at 60%-plus that we'll finish within the first half of 2015."
JambaGO performing well, CPG not so much.
Consumer packaged goods [CPG] and JambaGO represent the two main drivers for the recently created "new ventures" segment, that also includes Talbot Teas and the new line of ready-to-drink, cold-pressed juices.
Expectations for CPG were quite high in the past:
Sales seemed to move in the right direction, at least in the first two years, when the impact of JambaGO-related revenue was almost immaterial:
However, if we listen to the most recent management commentary, the picture now looks completely different, with JambaGO performing quite well and CPG representing a relatively small part of revenues:
Karen L. Luey - Chief Financial Officer, Principal Accounting Officer, Chief Administrative Officer, Executive Vice President and Secretary:
"Yes, so the breakout for the revenue piece, Greg, CPG was about $300,000 for the quarter and JambaGO was $1 million of revenue for the quarter. And just so that you have this in context too because I mentioned in the prepared remarks that those 2 categories combined were profitable. After allocating direct G&A and taking out the operating costs associated with that new ventures group, they were about $400,000 profitable for the quarter."
As far as CPG, the company seems to be going back to a pure licensing business model, that hopefully will represent a return to growth and less distraction for the management team:
Karen L. Luey - Chief Financial Officer, Principal Accounting Officer, Chief Administrative Officer, Executive Vice President and Secretary:
"With respect to our growth initiatives, the new ventures group which consists of JambaGO and CPG will be profitable again this quarter after direct G&A costs. We will work to exit our non-licensed CPG business of energy drinks and novelty bars throughout the remainder of 2014. For 2015, once we move back to 100% license, this becomes a business model that requires little management focus with a high margin flow through."
Once again, a deeper digging into numbers reveals that there's good and bad news hidden in the same data. Execution will be, once more, key to turn around the new ventures segment.
Conclusion
Jamba remains an attractive proposition for investors if you assume that the business will achieve, even in part, its long-term goal of becoming a high-margin, asset-light business with total sales exceeding $ 1 billion. However, history says that the road to this target hasn't really been smooth - and probably will not be exempt from bumps going forward.We also expect that the market will find it difficult, sometimes, to dig into all the company's metrics and properly evaluate the good and bad numbers. In such a climate, the best strategy would probably be to carefully monitor some key data, and try to take advantage of weakness created by some misleading headlines (big revenue decrease Y/Y), assuming the most important metrics move in the right direction (high flow through from franchising, CPG and JambaGO revenues).Update de análise técnica:
Após a quebra de duas sessões abaixo da linha de suporte (verificar que existe um segmento de suporte que poderá ser mais baixo), a cotação encontra-se a corrigir perto da linha de tendência ascendente, abaixo das médias móveis de 21 e 55 dias.
Mantêm-se a recomendação de compra, e a actual cotação como potencial de reforço de posição.
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