Jack in the Box fails to dodge the slowdown

SAN DIEGO Jack in the Box Inc. reported Wednesday a 3-percent drop in its second quarter profit and cited the same challenges plaguing almost all restaurant companies: higher costs and slowing sales.

For the quarter ended April 13, net income fell to $26.4 million, or 44 cents per share, from $27.2 million, or 40 cents per share, in the year-ago quarter. The increase in latest-quarter per-share earnings was aided by a reduced share count.

Total revenue rose 5 percent to $693.5 million, aided by new unit openings within both its namesake quick-service chain and the fast-casual Qdoba Mexican Grill. At quarter’s end, the company’s system included 2,142 Jack in the Box restaurants, 749 of which are franchised, and 423 Qdoba locations, 326 of which are franchised.

Second quarter same-store sales fell 0.1 percent at corporate Jack in the Box restaurants, a lower-than-anticipated result from the company's expectations of positive same-store sales between 1 percent and 2 percent. The company said that through the first half of the fiscal year, price increases have totaled about 2.5 percent, indicating the chain’s guest traffic is negative. System same-store sales at Qdoba increased 2.4 percent.

Many quick-service chains, with the exception of Burger King, have recently reported decreased or at least slowed same-store sales results. While quick-service restaurants have weathered the stalled economy and tight-fisted consumer spending better than their full-service counterparts, the early months of the year have shown that the lower-priced QSRs are also feeling a recessionary pinch.

Jack in the Box said it expects same-store sales at namesake corporate units to further decelerate in the current third quarter and to fall 2 percent. Qdoba’s third quarter same-store sales are expected to be flat to up 2 percent.

“Like many retailers we’re seeing softer sales at our restaurants in California, Phoenix and Las Vegas, which have been hardest hit by the housing downturn, high fuel prices and unemployment,” said Linda Lang, chairman and chief executive of Jack in the Box. “We’re experiencing positive sales growth in our other markets, where our two-year cumulative same-store sales increase is just under 10 percent.”

To boost traffic at the Jack in the Box chain, the company will introduce Real Fruit Smoothies systemwide this summer. It also plans to reintroduce the Acapulco Chicken Salad, which includes a mix of lettuce topped with shredded pepper jack cheese, grape tomatoes, cucumber, red onion and lime wedges served with blue corn tortilla strips and cilantro-lime dressing on the side. Chicken is available in grilled strips, crispy strips or Spicy Chicken Bites. Also, Jack in the Box recently introduced iced coffee expanded its line of ice cream shakes to include a Kona Coffee flavor.

The chain’s value menu and additional value-priced promotions will be emphasized through the year, the company added.