Jack in the Box Inc. lowered its outlook for fiscal 2010, saying that high unemployment was continuing to hurt sales at its flagship fast-food brand.
Sales at the company's Qdoba Mexican Grill chain, however, are exceeding expectations with consumers spending more in the fast-casual segment, Jack in the Box said Wednesday in reporting third-quarter results.
Linda Lang, the company's chairman, president and chief executive, said the company is intensifying efforts around Jack in the Box’s service consistency and improving the quality of the chain's signature products. The company is also accelerating restaurant reimaging efforts, with all corporate Jack in the Box locations expected to be remodeled by the end of 2011.
“Jack in the Box sales continue to be impacted by high unemployment in our major markets for our key customer demographics," Lang said. "Although our sales outlook remains cautious and largely reliant upon improvement in the economy, we are focused on enhancing the guest experience.”
For the third quarter ended July 4, Jack in the Box reported net income of $24.2 million, or 44 cents per share, compared with earnings of $19.6 million, or 34 cents per share, in the year-ago quarter, when the company booked a $13.3 million loss related to discontinued operations.
Latest-quarter results were negatively impacted by about 6 cents per share by a number of things, including impairments charges of $2.6 million tied to seven underperforming corporate Jack in the Box units.
Revenue for the latest quarter fell 9.1 percent to $523.3 million for the quarter, said the company, which operates or franchises 2,234 Jack in the Box restaurants and 515 Qdoba locations.
Same-store sales at corporate Jack in the Box restaurants fell 9.4 percent, compared with a 1-percent drop in last year's third quarter. The chain's performance also worsened sequentially from the second quarter, when same-store sales dropped 8.6 percent at corporate stores.
At Qdoba, same-store sales rose 4.6 percent in the quarter, compared with a year-ago decrease of 2.8 percent. Lang credited the chain’s Craft 2 menu, which lets guests combine options, as well as higher catering sales and a general shift by consumers to the fast-casual segment.
For the fourth quarter, the company is projecting same-store sales will decrease 4.5 percent to 5.5 percent at Jack in the Box company stores, and increase between 3 percent and 4 percent at Qdoba.
Jack in the Box revised downward its outlook for fiscal 2010 and said it now expects to earn $1.65 to $1.75 per share, based on a projections that same-store sales will decline 9 percent at Jack in the Box units and rise 2 percent at Qdoba. The company had previously estimated 2010 earnings between $1.85 to $2.05 per share and an expected same-store sales decrease between 6.5 percent to 8.5 percent at Jack in the Box and an increase of 1 percent to 3 percent at Qdoba.
Jack in the Box said it was making progress on its refranchising goals with the sale of 58 corporate Jack in the Box locations in the third quarter. Total proceeds related to refranchising during the quarter were $32.9 million, an average of $568,000 per restaurant.
“We reached an important milestone during the quarter as more than 50 percent of the Jack in the Box system is now franchised,” Lang said. “We remain on track to achieve our long-term goal to increase the percentage of franchise ownership to 70 to 80 percent by the end of fiscal 2013."
Contact Lisa Jennings at [email protected].