SAN DIEGO Jack in the Box Inc. on Tuesday said third-quarter sales started strong but deteriorated rapidly as consumers continued to cut back on spending and competitors across all segments offered deep discounts to lure in diners.
Margin-improvement initiatives helped boost earnings for the San Diego-based chain during the third quarter, but the company expects same-store sales to continue to be negative for the remainder of the fiscal year.
For the quarter ended July 5, San Diego-based Jack in the Box Inc. reported net income of $19.5 million, or 34 cents a share, compared with net income of $29.9 million or 51?cents per share, a year ago. Revenues fell 3 percent to $575.7 million.
Latest-quarter results included after-tax charges totaling $14.1 million, or 24 cents a share, related to the sale of the company's 61 Quick Stuff convenience stores, which were marked as discontinued operations. Earnings from continuing operations were $32.9 million, or 57 cents per share, Jack in the Box reported, up 11.5 percent from $29.5 million, or 50 cents a share, in the year-ago third quarter.
Jack in the Box also booked a pre-tax loss of about $2.4 million, or 3 cents per diluted share, related to the expected sale of low-performing Jack in the Box units that company officials said would close by the end of 2009.
Same-store sales for Jack in the Box company stores fell 1 percent in the third quarter, compared with a year-ago decrease of 0.4 percent. For sister brand Qdoba Mexican Grill, same-store sales declined 2.8 percent, compared with an increase of 0.5 percent a year ago.
“The ongoing recession, which was exacerbated by higher unemployment and rising gas prices during the quarter has consumers cutting back on their discretionary spending," said Linda Lang, Jack in the Box Inc. chairman and chief executive. "In addition, we have seen aggressive discounting by not only quick-service competitors, but other segments of the industry as well.”
The company saw margins improve to 18.4 percent of sales, compared with 16.7 percent of sales a year ago. Officials attributed the improvement to lower food-and-packing costs, a favorable product mix and price increases of 3.3 percent.
Menu introductions, such as the new tropical-flavor Real Fruit Smoothie, new Flavored Iced Teas and a new platform of mini burgers and sandwiches helped drive sales, officials said.
During the third quarter, Jack in the Box sold 23 company-owned units to franchisees during the quarter for $11.1 million as part of an ongoing refranchising effort aimed at increasing franchise ownership to 70 to 80 percent of the system. In the year-ago quarter, the company refranchised 17 restaurants for a total of $15.2 million. The system is now 42 percent franchised, officials said, compared with 36 percent a year ago.
Fifteen new Jack in the Box units opened during the quarter, including nine company-owned stores, bringing the system total to 2,199. The company also operates and franchises 491 Qdoba Mexican Grill restaurants.
For the fourth quarter, officials projected that same-store sales would decline between 2.5 percent and 4.5 percent at company-operated restaurants, compared with a 0.8-percent decline in the fourth quarter last year. Qdoba is expected to see a decline of 2 percent to 4 percent during the fourth quarter, compared with a year-ago decrease of 1 percent.
For the year, sales are expected to range between flat to a 1-percent decline for Jack in the Box and down 1 percent to 3 percent for Qdoba. Earnings per share are expected to range between $2.11 to $2.18. The company earned $2.01 per share in 2008.
Contact Lisa Jennings at [email protected].