TurboChef Cools Off

TurboChef (OVEN Quote) sank 6% late Tuesday after the maker of ovens for fast-food joints missed second-quarter revenue targets.

The Atlanta-based company lost $5 million, or 17 cents a share, compared with the year-ago loss of $5.9 million, or 21 cents a share. Revenue sank to $10.5 million from $10.8 million a year ago.

Analysts surveyed by Thomson Financial were looking for a 13-cent loss on revenue of $14.8 million.

TurboChef said revenue from non-Subway customers is expected to be $30 million to $34 million in 2006, up from $22 million in 2005.

What TurboChef called "overall margins on sales of ovens, parts and consumable items" rose to 38% from a pro forma 34% a year ago, excluding a warranty reserve addition. But price pressures on certain materials and component parts, as well as increased freight and handling charges and warranty costs, are offsetting those gains.

The company expects that the recently implemented price increases combined with the new 2006 warranty program will lead to improved margins.

"We also have finalized our go-to-market strategy and will sell directly to premium dealers and retail outlets," said CEO Jim Price. "We believe this is the right model for TurboChef, allowing us to more carefully control the brand's presence, how the oven is marketed and the quality of the cooking demonstrations."

TurboChef sank 55 cents to $9.01.