Curveball Hits Jamba Juice

SAN FRANCISCO-Jamba Inc. begins its first earnings report as a public company with “very upsetting news,” reported by Paul Clayton, CEO. He began the conference call with a rundown of how the company is handling the discovery of shipments of strawberries containing potentially harmful bacteria.

The shipments are from a single supplier, Cleugh’s Frozen Foods Inc. Jamba recovered most of the shipments before they were unpacked, according to Clayton, and immediately commenced a series of efforts to “make sure our employees and customers are safe.” It sanitized any potentially affected Jamba Juice units, notified the FDA and the public and established a toll-free number staffed by employees at headquarters here.

While the company received 800 calls, “I am relieved to say that no problems have been reported to date,” Clayton says. Rather than outsourcing to a call center, “our intention is to have a Jamba conversation with these customers, and response from customers with concerns has been very good.”

Asked by analysts about the potential financial impact, he says, “suppliers have insurance covering these kinds of matters, and we are going forward with the supplier in a collaborative way to cover the costs associated with management and communications.” Regarding any loss to profits, he says, “we haven’t seen any, but I can’t yet say what impact it will have on stores.”

The strawberry problem aside, the company reported revenues of $95.2 million for the 16-week period ended Oct. 17, up 12.3% from the 16-week period a year ago. The increase comes primarily from the 12 company-owned and six franchise units opened during the period.

Same-store sales declined 0.2%, “essentially flat,” said Don Breen, CFO. “Until stores diversify geographically, comps will be volatile, quarter to quarter,” he said, adding, “geographic diversity will mitigate the impact of weather.”

While the company projects a minimum growth of 20% a year in 2007, more geographic diversity will await more study of new markets, according to Clayton. New store rollouts will be primarily company-owned and in the existing markets of New York, Chicago, Denver, Salt Lake City, Seattle, Phoenix and California. “Opportunities in California remain robust,” Clayton said. Plans call for the eventual development of Florida as a core market. “We are anxious to exploit the huge opportunities between New York and Florida,” he added.

Jamba will begin studying international markets in early 2007. Units abroad will likely be opened with local partners.

Jamba also plans to expand its product offerings beyond fruit smoothies. “There’s a big opportunity in regards to food offerings in our stores,” Clayton said. He cited “day part opportunities in breakfast, and we’re well-positioned to take advantage of that trend.”

Jamba Juice Co. has more than 577 owned and franchised units in 23 states. Jamba Inc. was formed as a result of a merger between Charlotte, NC-based Services Acquisition Corp. International and locally based Jamba Juice Co. this March and subsequently went public on the Nasdaq exchange. Shares of JMBA opened trading on Dec. 6 at $10.86 a share, down nearly 3.5% from the close the previous day and down less than $1 a share from its high of $11.50 a share.