Comments on: Jamba Inc. – New CEO Gives Company a Boost

By: John L.

John L. — Fri, 29 May 2009 20:26:54 +0000

you pretty much nailed Q1 comps…nice work. i didn’t think the call was as bad as the stock price indicates today. i feel White is moving jmba in the right direction.

a couple things i’m encouraged about:
- White’s strategy of selling 5-10 stores to franchisees who may qualify for SBA financing makes me confident they can execute on their plan.

- I believe the go go initiative along with expanding the food test will add meaningful revenue and help comps.

thanks John! I look forward to your next JMBA post.

By: John Appel

John Appel — Fri, 29 May 2009 13:03:50 +0000

Yes. SSS were as expected (after adjusting for impact of shorter store hours), but costs were much lower. Likewise, the negative outlook for SSS (continued headwinds but improvements in H2 with easier comps), and the positive outlook for food and licensing initiatives are all in-line with my expectations, but it looks like costs will continue to be lower. As a result, I expect higher EBITDA and cash levels for the remainder of the year. Stay tuned….

By: Vince Randalo

Vince Randalo — Fri, 29 May 2009 12:18:08 +0000

Has your opinion of the company changed since the Quarter 1 earnings call?

By: John Appel

John Appel — Wed, 15 Apr 2009 18:03:27 +0000

Managing Director – thanks for the comments. One can’t really answer your question (1) w/o a good crystal ball, but my attempt is on the last line of my quarterly projections (“non-restricted cash”). I believe they could repay their debt through cash flow if necessary, but I expect management to be proactive in refinancing the debt. As for your question (2), management has said on its earnings calls that they would like to bring the ratio of company-owned to franchise stores closer to 50/50 from the current 70/30. I think that would be a positive.

By: The Managing Director

The Managing Director — Tue, 14 Apr 2009 01:47:59 +0000

I accidentally came across this site and was very impressed, I appreciate your work.

I note that under contractual obligations in the most recent K, JMBA discloses relatively large operating lease obligations, which isn’t surprising for a company in the restaurant/retailer space. JMBA also has $23M in long-term debt. My worry is that there could be more downside at this point if a turnaround is not imminent. I suppose I have a wait and see view.

I have a question about Jamba (JMBA) to ask you that will help me better understand the company’s situation: (1) Will JMBA have enough liquidity to survive a recovery in its business operations without resorting to store closings?;

and (2) Would it be a positive for JMBA to franchise more of its stores instead of running the stores themselves- in your talks with management have they spoken about this at all? As you point out above, a sale to a franchisee is better than absorbing the operating lease costs, and in my view franchising some more stores would be a positive for the business model. This could provide some downside protection to the investment thesis.

By: John Appel

John Appel — Mon, 30 Mar 2009 20:28:25 +0000

Somebody asked me if my price targets reflect my view of the company’s “fundamental” or M&A value. The answer is a definite “no.” In an M&A transaction, I would think the company would fetch closer to 4x store-level cash flow, or 7x contribution margin, each of which implies about $3.00 per share today (and hopefully a lot more in a few years).

By: John Appel

John Appel — Sun, 29 Mar 2009 16:46:31 +0000

I assume that JMBA comes close to its target of 10% of sales [for G&A]. My restaurant industry contacts and my own experience tell me that JMBA could operate at less than that if necessary.

By: John Appel

John Appel — Sun, 29 Mar 2009 16:43:02 +0000

The 10-K says that “no gain or loss was recorded upon [the] sale” of the 10 AZ stores (p. 102), so I assume they were sold for book value, which was probably written down somewhat in 2008. This must have been a good deal for the AZ franchisee, but if these stores were losing money for JMBA, the sale was better than closing the stores and continuing to absorb the lease costs.

As for the Nestle deal, I believe the claims that RTD smoothies and juices were pulled due to “production issues.” My understanding is that aseptic filling capacity is very tight, so it is possible that sufficient capacity was not available. I also know from experience that filling a thick juice product is difficult, so there may have been issues with line efficiency. My sources tell me that Nestle is starting up new aseptic filling capacity, so perhaps the drinks will be relaunched with new filling lines.

By: paul

paul — Sun, 29 Mar 2009 05:12:04 +0000

what are you basing your G&A run rate estimates on?

By: John L.

John L. — Fri, 27 Mar 2009 22:05:35 +0000

thanks for the article. couple questions:

what’s your estimate on proceeds from the sell of the 10 franchises earlier this month?

what’s your assessment on why the Nestle RTD deal was supsended? (I thought the product was marginal at best but i found it confusing that Nestle came out with a positive press release about early results but then suspended the initiative a few months later due to “production issues”..didn’t make sense to me)