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Jack in the Box bets on new product lines, price hikes

SAN DIEGO Jack in the Box Inc. said it would add breakfast bowls and a line of pita snack sandwiches to drive customer traffic and return to positive same-store sales.

Menu price increases are also slated to improve sales results. Jack in the Box already has increased average menu prices by 2.5 percent and said it has hired a pricing consultant to evaluate further increases and possible side effects for price-sensitive consumers.

Same-store sales for the chain’s most recent quarter ended last month came in better than expected, but still fell 0.4 percent. The company had said in May that it expected quarterly comparable-unit sales to drop 2 percent.

Company officials credited the popularity of its new Real Fruit Smoothies, which debuted in April, for driving same-store sales above company expectations. New menu introductions set for the current quarter also are expected to boost sales.

The Jack in the Box chain is scheduled to add two Breakfast Bowls next week. Both feature a blend of hash brown sticks, scrambled eggs, white cheddar cheese sauce, shredded cheddar and seasoning. The Hearty Breakfast Bowl also will include bacon and sausage, and the Denver Breakfast Bowl will include sliced ham, and red and green peppers. The prices of the bowls were not disclosed.

Later this month, the company is scheduled to launch new Pita Snacks, featuring a whole grain pita stuffed with shredded cheddar, lettuce, a smoky chipotle sauce and the choice of grilled or crispy chicken, marinated sirloin or a fish fillet. The snacks will be priced at $1.99 each, according to the chain.

For the quarter ended July 6, Jack in the Box Inc. reported net income of $29.9 million, or 51 cents per share, compared with $34.5 million, or 54 cents per share, for the year-ago quarter.

Softer sales in California, Phoenix and Las Vegas, coupled with higher food costs, were blamed for the 13-percent drop in profit.

Jack in the Box also cited higher commodity costs, particularly for cheese, eggs and shortening, as trouble spots during the quarter. Beef costs were up about 1 percent over the prior-year period, officials said, and food and packaging costs overall rose 50 basis points.

Revenues rose 16.2 percent to $709.5 million, driven mostly by jumps in distribution and franchise fees. Corporate restaurant sales fell because of the company’s refranchising efforts. System same-store sales for Jack in the Box’s sister brand, Qdoba Mexican Grill, rose 0.5 percent for the quarter.

At the Jack in the Box chain, 17 corporate units were sold to franchisees during the quarter as part of the franchisor’s effort to raise the proportion of franchised stores to 80 percent of the system. The sales garnered proceeds of $15.2 million in the latest quarter. All of the refranchised restaurants were in California.

The company expects flat same-store sales for Jack in the Box going into the fourth quarter, compared with a 5.2-percent increase a year ago. It also expects flat to a 1-percent gain in same-store sales at Qdoba, compared with the year-ago jump of 5.8 percent.

For the year, Jack in the Box narrowed its per-share earnings outlook to between $2.01 and $2.05 from previous company expectations of between $1.98 and $2.08. Full-year same-store sales for Jack in the Box are expected to be unchanged from a year-ago or to increase 1 percent. At Qdoba, same-store sales are expected to increase between 1 percent and 2 percent.

The Jack in the Box chain includes 2,148 locations, of which 770 are franchised. Qdoba includes 438 units, of which 339 are franchised.

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