Jamba Turned to Target at the Worst Possible Time

Jamba's move to add kiosks in Target food courts may not be paying off.

Jan 13, 2014 at 10:10AM

Jambago

Source: Jamba. 

The silver lining in Jamba's (NASDAQ:JMBA) move three months ago to hose down its performance outlook was that it was installing JambaGo kiosks at 1,000 Target (NYSE:TGT) cafe locations. 

The smoothie-blending machines showed up in time for the cheap-chic retailer's holiday shopping season, but so did the hackers that have scared away shoppers. 

Target's been the biggest retail loser of the season since revealing that 40 million credit and debit card transactions may have been compromised by hackers during the first three weeks of the critical holiday shopping season. 

Target wasn't able to bounce back after that, and even offering 10% off to customers during the final weekend before Christmas wasn't enough to turn things around. The struggling discounter revealed on Friday that the problem was even worse than originally reported, and its forensic investigation shows that up to 70 million individuals had their names, mailing addresses, phone numbers, or email addresses stolen in the process.

There's a credibility crisis at Target. The once-trendy chain that was expecting flat comps during the holiday quarter is now eyeing a 2.5% decline for the period fueled by a 2% to 6% dive since the story broke.

It's against this backdrop of defecting shoppers that Jamba Juice's JambaGo machines are hoping to refresh customers with their icy fruit beverages. It should now be perfectly understandable if the Target cafe installations get off to a rough start. If folks can't trust their plastic at Target, that's going to slow down the sales at its food concessions area. 

It's important not to place too much weight on the self-serve kiosks.  A typical JambaGo generates just five figures in annual revenue. It's not at the needle-moving level of a company-owned store. However, JambaGo is a great way for the company to expand brand awareness. On that front, association with Target probably isn't the best thing at the moment, but that will pass. Target will make its platform more secure. It will win back shopper confidence. It doesn't really have much of a choice. Jamba's partner may seem like a liability at this embarrassing moment, but it's better to have those JambaGo machines ready now for the inevitable turnaround than not to have them there at all.

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Longtime Fool contributor Rick Munarriz owns shares of Jamba. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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