Tuesday, May 27, 2008

Jamba Juice, Inc. (JMBA)

Jamba Juice, Inc. reported earnings today, or, perhaps more accurately, no earnings--it lost 0.21 cents a share in Q1. JMBA is currently selling below book value, but that may not necessarily indicate that it's a good value play. Its products appeal mainly in the summertime, and outside of the West Coast and the South, the weather isn't sufficiently warm to increase demand for cold fruit smoothies year-round. The breakfast shakes it introduced earlier this year were a good idea, but they haven't caught on like the Frappuccino. Perhaps due to the lack of advertising of its new products, same-store sales declined. Jamba continues to have one of my favorite drinks, the Matcha Green Tea Blast. The key for selling drinks seems to be to make them sweet with whipped cream and include chocolate. Jamba, unfortunately, doesn't really have too many chocolate drinks.

But the problem isn't with Jamba's products--its smoothies taste good, and its stores are packed when the weather is hot. Jamba's issue is that consumers think of the company only when the weather gets warm. In order to convince consumers that Jamba smoothies should be a daily addition to one's diet, Jamba needs to add drive-thrus or get locations that aren't in strip malls to encourage time-strapped workers to go to Jamba in the morning. (Do you know a lot of people who regularly go to suburban strip malls--where Jamba has many of its stores--in the morning? I certainly don't.) To give you an example, I work in downtown San Jose, and there are two Starbucks and one Peet's within walking distance, but no Jamba Juice store. If there was a Jamba nearby, I would go almost every single day. A Popeye's Chicken store is opening nearby my office--and still, no Jamba. Jamba's failure to seek out good locations is mind-boggling. By focusing on strip malls, Jamba is robbing itself and its shareholders of the lunchtime and business crowd. It's a very costly mistake, and many a store has gone out of business because it failed to properly choose its location.

In other news, Jamba announced a deal with Nestle today, which pumped its stock 13%, or thirty cents; however, this appears to be old news, as Jamba already announced this deal several months ago. Jamba's shareholder meeting is tomorrow at the Doubletree Hotel. I will try to attend, but may not be able to make it because the Long's Drugs shareholder meeting is on the same day.

My three worst trades, percentage-wise, have been JMBA, SPCHB, and PCYC. I'm losing around 1,600 dollars total on these three stocks and refuse to sell them because once a stock hits the single digits, I figure either it's going to go back up in five years or go bankrupt, and I usually pull the risk trigger and wait and see. I don't have much money in these stocks anymore--but I am still frustrated with Jamba's management because it fails to understand that location is at least half the game in the food business.

No comments: