After more than two years of consistently positive comps, Jamba's (NASDAQ: JMBA ) army of blenders retreated this past quarter.
The parent of the Jamba Juice smoothie chain posted lackluster financial results today. Revenue slipped 6.3% to $61.4 million, fueled by a 3.4% decline systemwide comps. This isn't pretty, but it's also not news. Jamba's stock fell sharply last month after warning the market of its sloppy second half of the year.
Summer is a pretty big deal for Jamba. This is a seasonal business. Sales peak during the warm summer months. However, after more than two years of positive systemwide sales growth, Jamba was willing to call out the competition as a concern in last month's announcement. It hadn't done that before.
Starbucks (NASDAQ: SBUX ) and McDonald's (NYSE: MCD ) have been making smoothies cheaper and more accessible. The product at the two chains is limited to two to three varieties -- and good luck asking for variations of nutritional boosts -- but it may be taking a toll on the company.
Jamba's taking a page out of the Starbucks playbook by ramping up its product offerings, but it's never going to match the drive-thru convenience -- or the price points -- of McDonald's. Then again, Jamba did point out during last night's call that it opened its first prototype unit with drive-thru access. Will it be enough? Sliding comps in this climate suggest that Jamba's losing some of its focus as it tries to keep up with Starbucks and McDonald's.
Jamba's margins declined, naturally. It's hard to milk more profit out of every dollar in sales when comps are going the wrong way. The 849-unit chain is sticking to the guidance it offered last month, and that points to another challenging quarter before bouncing back in 2014.
Investors may be skeptical about taking Jamba's robust outlook seriously. We saw how quickly 2013 turned on the retailer. However, Jamba is still growing its chain and striking new deals, including the one announced last month that will add 1,000 JambaGo kiosks at Target (NYSE: TGT ) stores.
Target is a pretty sweet catch for Jamba. The "cheap chic" discounter could introduce Jamba's premium fruit smoothies to a new audience of beverage seekers who didn't know the world was limited to the ho-hum smoothies being blended at Mickey D's or Starbucks. The kiosks themselves aren't likely to move the needle at Target, but it's a great deal in terms of broadening brand awareness.
Jamba revealed during the call that there has been sequential improvement in monthly comps lately, but not to the level that would result in pushing its guidance higher. A tough summer where Starbucks ramped up its promotions early as Orange Julius and Dairy Queen actively promoted $1.49 smoothies clearly hurt its ability to charge premium prices sans promotions.
Looking ahead, Jamba sees the expansion of its fresh-squeezed juices offering and a new Wellness Bowls rollout in 2014 getting growth back on track. It's also eyeing aggressive international opportunities that could result in as many as 300 stores overseas in three to five years. Jamba isn't giving up, even if many investors have seen the stock peak this summer.
Add these three ingredients to your next portfolio smoothie
The best investing approach is to choose great companies and stick with them for the long term. The Motley Fool's free report "3 Stocks That Will Help You Retire Rich" names stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of. Click here now to keep reading.