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Jamba downgrades outlook, cites 3Q sales slump

Jamba downgrades outlook, cites 3Q sales slump

Preliminary results show first same-store sales decline in two years

Jamba Inc. downgraded its outlook for the year on Monday, saying bad weather and an increasingly gloomy macroeconomic climate significantly hurt sales at its Jamba Juice chain in the third quarter.

In a third-quarter preview and update on growth plans, James White, Jamba Inc.’s chair, president and chief executive, said the smoothie chain is adjusting to the “new normal,” which includes intensified competition and ongoing constrained consumer confidence.

“We’re making the assumption now that we’re in the new normal,” he said. “It’s just a much more difficult operating environment, and winners and losers will be separated on the strength of their own innovation and marketing capabilities.”

White said adverse weather this summer and the economic malaise in general turned same-store sales downward for the first time in two years.

Preliminary results indicate third-quarter same-store sales fell 3.4 percent systemwide, including a 5.5-percent decline among company-owned stores and a 1.3-percent decline among franchise locations.

White said the downward trends are in line with what the industry is experiencing as a whole as consumers continue to cut back spending. The company estimated that the slowdown in consumer spending reduced same-store sales in the third quarter by between 3 percent and 4 percent.

Another factor in the sales decline is the difficult comparisons with successful promotions last year, including dollar-day events and the launch of fruit refreshers made with coconut water. This year’s marketing efforts just didn’t have the same impact, said White, though the company’s marketing spend was roughly the same.

For the year, Jamba now expects same-store sales to be flat to an increase of 1 percent. Earlier this year, the company had projected same-store sales for the year to rise 4 percent to 6 percent.

At the same time, however, White expressed confidence that same-store sales will be positive again in 2014 and expects them to climb between 2 percent and 4 percent next year. He noted that the 829-unit chain is accelerating expansion of the self-serve JambaGo concept, as well pushing the brand overseas.

The company has signed an agreement to add more than 1,000 JambaGo locations to Target retail stores across the country, which represents the largest single expansion of the unmanned outlets to date, bringing the total number of locations to 1,800 before the end of the year. So far, the company has been putting the JambaGo units primarily in schools.

The JambaGo outlets are averaging about $2,000 in annual net profit per location, which translates to about $3.6 million in income alone.

The company is also expecting to bring the Jamba Juice brand to between seven and nine countries by the end of 2015 and sees potential for up to 1,500 units in foreign markets over time. Jamba Juice had 42 international units in four countries at the end of the second quarter.

Meanwhile, Jamba Juice is rolling out a new mobile pay option, which will be followed by a new loyalty program to come in the first quarter of next year, the company said.

The chain has also added its premium fresh juice line to 50 units in California, a move that has demonstrated a sales lift of between 2 percent and 3 percent at those units.

Next year the company plans to add the premium juices, which includes a restaurant refresh, to 50 to 100 company and 50 to 100 franchise units. “Most significant is we think we have a mechanism to expand fresh juice at a much lower cost to the full system by early next year,” said White.

The company’s plans to open 60 to 80 new Jamba Juice locations this year remain unchanged.

Based in Emeryville, Calif., the Jamba Juice chain includes 295 company-owned and 492 franchised locations in the U.S., along with 42 international units.

Correction: Oct. 8, 2013 An earlier version of this story misstated JambaGo profit per unit as sales. The units average about $2,000 in net profit per location.

Contact Lisa Jennings at [email protected]
Follow her on Twitter @livetodineout

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