Reimaging and improved service initiatives boosted second quarter same-store sales at Jack in the Box Inc., but margins continue to be challenged by high commodity costs.
San Diego-based Jack in the Box on Wednesday reported net earnings of $21.6 million, or 48 cents per share, for the April 15-ended quarter, compared with $6.8 million, or 13 cents per share, in the year-earlier quarter.
Consolidated revenue rose 0.3 percent to $506.6 million, compared with $505.1 million for the year-earlier quarter.
Jack in the Box saw same-store sales at company-owned locations rose 5.6 percent, reflecting a 3.1-percent increase in traffic and a 2.5-percent increase in average check, the company said. Same-store sales at franchise locations rose 3.6 percent.
At sister brand Qdoba Mexican Grill, same-store sales grew systemwide by 3 percent, rising 3.8 percent for company-owned units and 2.2 percent among franchise locations.
Linda Lang, Jack in the Box Inc.’s chair and chief executive, said improvements the company has been making over the past year at Jack in the Box have been taking hold. Efforts have included the upgrade of core menu items, a recently completed reimaging program, and efforts to improve service.
The company, for example, has shaved 30 seconds off of speed-of-service rates, which has helped boost sales during the time-sensitive dayparts of breakfast and lunch, Lang said.
Jack in the Box also improved its market share, Lang said, despite aggressive couponing by “a big competitor who is trying to make a resurgence.”
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Quoting data from research firm The NPD Group, Lang said Jack in the Box’s same-store sales growth exceeded trends for the quick-service sandwich segment during the quarter. She credited the chain’s promotion of bundled meals, which have favorable margins, rather than an emphasis on coupons.
Still, the company said this year it would look at ways to cut costs within its overhead structure, including possible opportunities for outsourcing, restructuring certain functions and workforce reductions.
During the second quarter, the company reported restructuring charges of $1.5 million, or about 2 cents per share, related to severance costs for positions that were eliminated.
Commodity costs were up about 3 percent during the quarter, and the company said inflation will be a continuing challenge – primarily for beef, which makes up about 20 percent of the company’s commodity spend. Overall, however, the company lowered its inflation projection for the year, saying commodity costs would likely be up 3 percent to 4 percent in 2012. Previously, the estimated increase was 5 percent.
Jack in the Box Inc. acquired 25 franchised Qdoba locations during the quarter for $33 million. Seven new Jack in the Box locations opened, three of which were franchised. The Qdoba chain added eight restaurants, including six franchised locations.
At the end of the quarter, the company operated, licensed or franchised 2,242 Jack in the Box and 605 Qdoba locations.
For the third quarter, the company projected same-store sales growth of 3 percent to 4 percent for Jack in the Box company-owned units and a 3-percent to 4-percent increase for Qdoba systemwide. For the fiscal year, same-store sales are expected to rise 3.5 percent to 4.5 percent for Jack in the Box corporate units; the same increase is expected for Qdoba systemwide.
Earnings per share are expected to range from $1.28 to $1.50, excluding additional restructuring charges for the second half of the year.
Jack in the Box is continuing its ongoing refranchising plan and expects to sell 80 to 120 locations to franchisees before the end of the year. The chain will open 30 to 35 new stores, including about 15 corporate units.
About 60 to 70 new Qdoba restaurants are planned for the year, of which 25 to 30 will be company owned.
Contact Lisa Jennings at [email protected].
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