Summary
With a new CEO and management team in place, Jamba is working to expand its menu offerings so it is not perceived as a "snack only" destination, and to generate incremental profit flow-through.
While we give the new team credit for trying, expanding into a non-core offering will be the most expensive and time consuming pathway to success.
Analysis
Jamba's loss of momentum in 2007/2008 in its California base and other market areas sales and profit declines; new CEO and team, turnaround approach and new equity investors are known now. Many other less grounded, less than 3 daypart focus chain restaurant operators have struggled.
We have one of the JMBA test units near our office, that is selling the test items. The sandwiches, salads and wraps are of good appearance and flavor profile. When introduced in June, there was lunchtime trial. That seems to have slowed a bit, based on my observation.
However, the overall average check/price/value relationship needs further work: with the $5.50 sandwich/wrap/salad, and the price of a regular smoothie (around $3.95), the existing $2 instant discount need to continue. $8 for lunch at Jamba Juice is about the same (or more) than many casual dining operators, right now.
What about a smaller smoothie portion size to be sold along with the new items?
Otherwise, we remain concerned about re-franchising stores anywhere, when the company doesn't have the core concept figured out.
Q2 2009 earnings released on August 20th had a 13.7% comparable sales decrease and a 6.9% decrease in store level EBITDA, of great note.
This author consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
