EMERYVILLE Calif. Despite recording a net loss, depressed margins and negative same-store sales for the first quarter, Jamba Inc. officials expressed optimism on Wednesday about both its newly launched breakfast service and ready-to-drink beverages.
The company reported a net loss of $6.4 million, or 12 cents per share, for the quarter ended April 22, which was down significantly from a year-ago profit of $11.9 million, or 20 cents per share. Revenue for the company, operates 515 units in the 726-unit Jamba Juice chain, rose 13.6 percent to $101.6 million.
“While our first quarter results did not meet our expectations, I believe that we have the right strategy in place to transform our business to a healthy living company, improve the performance of our existing stores and increase shareholder value,” Paul Clayton, Jamba's chief executive, said in a statement.
That strategy includes fewer openings this year and such cost-cutting measures as the closing of 10 underperforming stores, the termination of leases at seven planned locations and the reduction of the company’s workforce by 53 positions, all of which were announced earlier this month. Those moves are expected to reduce general and administrative expenses by between $7 million and $8 million on an annualized basis, the company said Wednesday.
Jamba Juice also said it expects to spark sales through its breakfast offerings, which were introduced during the first quarter. Clayton said that early indications “appear positive” for the new line, which includes baked goods and "chunky" smoothies.
On Wednesday, Jamba debuted a new line of packaged Jamba Smoothies and Jamba Juices, available in grocery locations, convenience stores and select Jamba Juice units in eight Western states. The retail products are the fruit of a partnership with Nestle USA that was announced late last year.
The ready-to-drink smoothie line flavors include Strawberries Wild with Energy Boost; Orange Dream Machine with Immunity; and Banana Berry with Heart Healthy Boost. The juice flavors include Orange Strawberry Banana with Protein Boost; Mango Orange Peach with Fiber Boost; and Very Berry with Calcium Boost.
Using a best case scenario, securities analyst Jeff Farmer at Jefferies & Co. said royalties from the new retail products could add $1.5 million to Jamba’s revenue and 3 cents to per-share earnings in fiscal 2009.
While the smoothies and juices represent “a nice brand builder,” Farmer said, the retail line “is not likely to be a meaningful earnings driver over the next few years and does little to offset the company’s key earnings headwinds, which include negative same-store sales, declining new-unit productivity and eroding unit-level economics.”
Jamba’s latest-quarter financial results included a $4.0 million store impairment expense and a gain from derivative liabilities of $5.6 million, which was down from a gain of $15.2 million in the year-ago quarter. The company’s loss from operations increased to $19.6 million, compared with a loss from operations of $8.0 million last year.
Analyst Farmer said Jamba’s restaurant-level margins were cut in half to 6.8 percent, from 13.6 percent last year, affected mostly by increases in labor costs and declining sales.
As previously reported, latest-quarter same-store sales at corporate locations fell 4.2 percent. In California, which accounts for about 76 percent of the same-store sales base, comparable-store sales declined 5.6 percent, while outside of California, same-store sales inched up 0.6 percent.
