The Zacks Analyst Blog Highlights: Jamba, Limited Brands, Gap, Hanesbrands and JA Solar Holdings Co. Ltd

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Aug 19, 2011, 09:30 ET

CHICAGO, Aug. 19, 2011 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Jamba Inc. (Nasdaq: JMBA), Limited Brands, Inc. (NYSE: LTD) Gap Inc. (NYSE: GPS) Hanesbrands Inc. (NYSE: HBI) and JA Solar Holdings Co. Ltd (Nasdaq: JASO).

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Here are highlights from Thursday's Analyst Blog:

Jamba Beats, Maintains Outlook

Jamba Inc. (Nasdaq: JMBA) reported second quarter 2011 earnings of 5 cents per share, surpassing the Zacks Consensus Estimate of 3 cents as well as the prior-year earnings of 2 cents. Jamba benefited from the efficiencies in its cost structure, which offset the decline in revenue.

The top line of the company continues to struggle, with consolidated revenues falling 20.5% year over year to $58.9 million. The revenues declined primarily due to the shift from company-owned store sales to royalties and franchise fees as a result of the refranchising initiative, partially compensated by system-wide comparable restaurant sales growth of 2.9%. Fruit & Veggie Smoothie, coconut Water Refreshers, hot breakfast wraps, and frozen yogurt helped drive the attachment rate higher in the second quarter of 2011 as well as comparable-store sales.

Outlook

Based in Emeryville, California, the company continues to expect comparable store sales in the range of 2–4% for fiscal 2011 and adjusted operating margin in the range of 18−20%.

Our Take

We remain impressed with Jamba's slow-but-steady turnaround. Apart from the domestic market, Jamba is in an expansion spree in the overseas market. Countries Jamba is currently binging on are Korea, Philippines and Canada. Among them, Jamba brand has been well received by Korean customers, encouraging Jamba's Korean partner to accelerate store opening. Jamba anticipates retail distribution to grow from 25,000 to more than 30,000 by this year end.

Along with expansion, the company is also on track to innovate a new beverage line and a value-based menu offer. Jamba witnessed increases in all 4 day-parts for the first time in the last four years, including the dinner day-part, which was aided by the frozen-yogurt platform. The company's cost containment effort also augured well for its earnings.

Limited Brands Tops, Guides Higher

Limited Brands, Inc. (NYSE: LTD), a specialty retailer of women's intimate and other apparel, beauty and personal care products, recently posted second-quarter 2011 results. The quarterly earnings of 48 cents a share beat the Zacks Consensus Estimate of 46 cents, and rose 33% from 36 cents earned in the prior-year quarter riding on an improving sales environment.

The quarterly earnings also came ahead of the company's guidance range of 38 cents to 43 cents a share provided earlier. The better-than-expected results, prompted management to raise its August comparable-store sales and fiscal 2011 earnings outlook.

Let's Dig Deep

Limited Brands, which competes with Gap Inc. (NYSE: GPS) and Hanesbrands Inc. (NYSE: HBI), posted net sales of $2,458.1 million that climbed 10% from the prior-year quarter, and also came ahead of the Zacks Consensus Estimate of $2,437 million.

Comparable-store sales for the quarter jumped 9% compared with 7% registered in the year-earlier quarter. Comps rose 6% in May, 12% in June and 6% in July. The consumers, who cut back their discretionary spending during the recession, are now gradually loosening their wallets.

Sales at Victoria's Secret Stores & Victoria's Secret Beauty increased 11% to $1,064 million, whereas comps were also up by 12%. Victoria's Secret Direct sales inched up 1% to $393 million. La Senza comps rose marginally by 1% during the quarter.

Total Victoria Secret sales grew 8% to $1,570.7 million, driven by an 11% rise in comps. Bath & Body Works & The White Barn Candle Co.'s total sales were up 5% to $563 million with a 4% increase in comps.

Despite a 6% increase in cost of goods sold, buying and occupancy, gross profit for the quarter surged 16% to $902.1 million, powered by an increase in the top-line, whereas gross margin expanded 200 basis points to 36.7%. Operating income soared 30% to $307 million, whereas operating margin expanded 190 basis points to 12.5%.

Guidance

Management now expects the third quarter earnings in the range of 17 cents to 22 cents and fiscal 2011 earnings between $2.35 and $2.50 per share. Earlier, Limited Brands projected fiscal 2011 earnings between $2.25 and $2.45 per share.

Limited Brands now expects comparable-store sales for the third quarter to be up in the low to mid-single digit range and for fiscal 2011 to rise in the mid-single digit range. The company now forecasts August comparable-store sales to jump in the high-single-digit range compared with a low-single-digit range projected earlier.

Our View

Limited Brands' sustained focus on cost containment, inventory management, and merchandise initiatives has kept it afloat in a sluggish retail environment, as evident from its second-quarter 2011 results. The company's Bath & Body Works segment is gaining traction, driven by a rise in store transactions, enhancement in the direct channel business and growth from new stores.

Victoria's Secret Stores has been performing well, and the company is also in a constant process of revamping its La Senza brand. Limited Brands is keen to enhance its retail footprint across the globe by expanding aggressively in Canada, and other international markets. However, stiff competition and erratic consumer behavior remain stumbling blocks.

Currently, we have a long-term Neutral rating on Limited Brands, which operates 2,951 stores. The stock holds a Zacks #2 Rank, which translates into a short-term Buy recommendation.

JA Solar Bleeds, Trims Guidance

JA Solar Holdings Co. Ltd (Nasdaq: JASO) announced loss per American Depositary Share (EPADS) of 22 cents in its second quarter of 2011, which came way below the Zacks Consensus Estimate of a 3-cent loss. In the year-ago quarter the company clocked earnings per ADS of 19 cents.

Quarterly Performance

JA Solar's revenues in the reported quarter were $413 million, ahead of the Zacks Consensus Estimate of $408 million and year-ago quarterly revenue of $368.3 million. Revenues were, however, lower compared to $563.7 million in the first quarter of 2011.

In the reported quarter JA Solar's total shipments were 401MW, compared with shipments of 451MW in the first quarter of 2011, representing a sequential decrease of 11.1%. However, year-over-year shipments grew 28.9% from 311MW.

JA Solar's gross loss in the second quarter of 2011 was $11.1 million, compared with a gross profit of $97.5 million in the first quarter of 2011 and gross profit of $85.3 million in the second quarter of 2010.

Total operating expenses in the second quarter of 2011 were $20.1 million, compared with $13.1 million in the first quarter of 2011 and $29.1 million in the second quarter of 2010. Total operating expenses represented 4.9% of net revenue in the second quarter of 2011, compared with 2.3% in the first quarter of 2011 and 7.9% in the second quarter of 2010.

Operating loss in the second quarter of 2011 was $31.3 million, compared with operating income of $84.4 million in the first quarter of 2011 and operating income of $56.2 million in the second quarter of 2010. Overall the company incurred a net loss of $35.4 million versus net income of $28.9 million in the year-ago period.

Outlook

Looking forward, JA Solar expects third quarterly module shipments in the range of approximately 450 MW–470 MW. However, faced with subsidy cutbacks in key markets like Germany and Italy, the company trimmed its fiscal 2011 shipment outlook to 1.8 GW from the earlier forecast of 2.2 GW.

Thus we currently have a long-term Underperform recommendation on JA Solar. In the near-term, apprehensions over the tepid module demand in Europe, rising competition, wafer dependency, financial stability of its customers and oversupply of solar cells in the market will restrain the valuation of the company.

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