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Jack in the Box 2Q profit down, but sales trends improve

Jack in the Box Inc. reported a 62-percent slide in second-quarter net income, but it said sales trends improved after taking a hit from severe weather earlier this year.

The San Diego-based company said earnings for the April 17-ended quarter totaled $6.8 million, or 13 cents per share, compared with profit of $17.7 million, or 32 cents per share, for the second quarter last year.

The company noted that gains from refranchising 26 Jack in the Box restaurants contributed about 1 cent per share for the quarter, compared with a 4-cent per share benefit from the sale of 30 restaurants during the year-ago quarter.

Corporate revenue fell 4.6 percent to $505.1 million, which reflected a decline in company restaurant sales, but gains in distribution sale and franchise revenue.

Same-store sales systemwide for the Jack in the Box chain were up 0.1 percent, lead primarily by a 0.8-percent increase among corporate units and a 0.3-percent decline among franchised locations.

Linda Lang, Jack in the Box’s chair, president and chief executive, said the sales increase among corporate units was “ahead of our expectations, as sales and traffic rebounded after severe weather impacted many of our major markets in the first four weeks of the quarter.”

The second quarter marked three consecutive quarters of improving trends, she noted, momentum that she expects will continue.

“We believe the investments we have made in the business to enhance the entire guest experience, along with employment growth, will drive improved sales results at the Jack in the Box brand,” she said.

Jack in the Box’s sister brand Qdoba Mexican Grill saw systemwide same-store sales increase 6 percent for the quarter, which Lang said was driven primarily by transaction growth as well as higher catering sales.

Commodity costs were about 5 percent higher for both brands during the quarter, largely because of higher costs for beef, produce, cheese, pork, dairy and shortening. Those increases were offset somewhat by lower costs for bakery and poultry, as well as the benefit of higher menu prices.

Eight new Jack in the Box locations opened during the second quarter, including six franchised units. Another 10 Qdoba restaurants opened, of which five are franchised.

The company ended the quarter with 2,220 Jack in the Box units, of which 1,372 were franchised, and 549 Qdoba restaurants, of which 328 were franchised.

In its outlook for the third quarter, the company is projecting same-store sales will increase between 2 percent to 4 percent at Jack in the Box company units, and increase between 4 percent to 6 percent at Qdoba.

Commodity costs are expected to increase 6 percent to 7 percent for the quarter, driven by higher costs for most commodities other than poultry and potatoes.

The company raised its same-store sales outlook for the full year, saying it now expects same-store sales to be up 1 percent to 3 percent at Jack in the Box company restaurants, and up 4 percent to 6 percent at Qdoba.

Previously, officials had projected same-store sales for the year of between negative 2 percent to an increase of 2 percent for Jack in the Box, and an increase between 3 percent to 5 percent for Qdoba.

Overall commodity costs are expected to increase between 4.5 percent and 5.5 percent for the full year.

Earnings per share for the year are expected to range between $1.40 to $1.65. The company earned $1.26 per share in fiscal 2010.

Between 30 and 35 new Jack in the Box locations will open this year, including about 18 corporate units, as well as 60 to 70 Qdoba restaurants, of which 25 will be company owned.

Contact Lisa Jennings at [email protected].
Follow her on Twitter: @livetodineout

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