BWLD Buffalo Wild Wings, Inc. (delisted)

California-based Jamba Inc (JMBA) recently signed a long-term development agreement with Canada Juice Corp. to expand in Canada.

As per the deal, Canada Juice Corp. will develop 80 Jamba Juice restaurants in Canada over the next ten years, through franchising. However, the financial terms of the deal were not disclosed. The first Jamba Juice location in the Canada is slated to open in late 2011.

Canada Juice Corp. operates 1,200 stores in 25 countries under several brands including Yogen Fruz, Yogurty's and I Can't Believe It's Yogurt.

The recent deal affirms Jamba’s intent to make Canada one of its prime international markets, after South Korea and the Philippines. We believe the Canadian market offers great growth opportunities as Canadians are appreciative of high quality food.   

Jamba is in an expansion spree in the overseas market. In the second quarter of 2010, Jamba signed a significant international agreement with SPC Group to develop up to 200 stores in South Korea. In April 2011, the company signed an agreement with Max’s Group of Companies to open 40 stores in Philippines over the next ten years.

If the company successfully completes its current expansion plans, it would widen its global presence considerably. Jamba Juice also expects to add up to 50 to 70 new domestic traditional and non-traditional franchise locations in 2011.

In the beginning of April, Scottsdale, Arizona-based P.F. Chang's China Bistro, Inc (PFCB), an arch rival of Jamba, inked a deal with Interaction Asian Restaurants L.P to expand to Canada. As per the agreement, P.F Chang’s is expected to open Bistro restaurants in eight Canadian provinces. The first restaurant will come up in 2012

Another competitor of Jamba, Buffalo Wild Wings Inc (BWLD) is also increasing its footprint in Canada. The company plans to open more than 50 company-owned and franchised restaurants in Canada over the next 5 years.

Moreover, Jamba’s transition to a more franchise-centric model will reduce its capital employed and stabilize cash flow generation. The company narrowed down its loss in the recently concluded quarter based on its restructuring strategies.

In our opinion, Jamba’s results will gradually enter into the positive territory aided by a planned business model. For fiscal 2011, management expects comparable store sales in the range of positive 2% to 4% and operating margin between 18% and 20%. Jamba currently retains a Zacks #3 Rank (short-term 'Hold' rating). We are also maintaining our long-term Neutral recommendation on the stock.

 
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