Can Jamba Bounce Back?

Jamba Juice's menu is full of boosts to provide functional kicks to its blended fruit smoothies. Now investors will want to know if they can order a boost for parent Jamba itself. 

Shares of the leading stand-alone smoothie chain plunged 17% last week, hitting its lowest level since the chain's reverse split. Jamba took a hit despite announcing a deal to expand its growing network of JambaGo kiosks by 1,000 locations through a deal with Target, but it's hard to see the cheap-chic department store retailer as a silver lining when you're dramatically hosing down your guidance for the balance of the year.  

Jamba's comps for the seasonally significant summer quarter that ended last month declined 3.4%, leaving the blender baron to target systemwide same-store sales clocking in flat to 1% higher for all of 2013. This is bad. Jamba's comps were up 2.8% through the first half of the year, and as recently as two months ago it was calling for 4% to 6% in same-store sales growth. Jamba also took a wheatgrass whacker to its earlier guidance for this year's store-level and operating margins. 

Analysts soured on the stock in a hurry. Before the report, they expected Jamba to earn $0.36 a share this year and $0.66 a share come 2014. Now the average profit target is at $0.11 a share for 2013 and $0.38 a share for next year.

One of the analysts lowering their ratings was Northland Capital Markets' Reed Alan Anderson. He actually kicked off the conference call's Q&A session by pressing the company on competition. This is the first time that Jamba has singled out smoothie-whirring rivals as a factor in its earnings release, and Anderson wanted some color. Jamba's comps had been positive for several quarters before this summertime slip. What was different? Starbucks hasn't expanded its offerings or gotten more aggressive in pricing or marketing in years. McDonald's added smoothies to its McCafe line of premium beverages a few years ago. It didn't seem to be doing anything different from before, when Jamba's stores were ringing up greater sales than it did a year earlier. 

Jamba deflected Anderson's questions, pointing primarily to weak retailing trends and unseasonable cool weather in key markets. Clearly, Northland Capital's analyst didn't like the response. He downgraded the stock, and he wasn't alone.

Jamba's product is different enough from what passes for a smoothie at Starbucks and the simpleton servings at Mickey D's. It should bounce back. However, Jamba's credibility was rightfully called out last week. Jamba was already nearly halfway through the third quarter when it offered up rosy guidance in August. If its visibility can't be trusted, words alone won't be enough to bring Jamba back. 

We already know that the third quarter will be a major letdown, but will the market be able to count on any updated outlook it offers at the time? Jamba has a lot of long-term potential, but in the near term it has a lot to prove.

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Longtime Fool contributor Rick Munarriz owns shares of Jamba. The Motley Fool recommends McDonald's and Starbucks. The Motley Fool owns shares of McDonald's and Starbucks. 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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