SAN DIEGO Jack in the Box Inc. reported Wednesday a 14-percent increase in second-quarter earnings as lower food and operating costs helped drive profit and offset a sales slump.
For the quarter ended April 12, the San Diego-based company reported earnings of $29.9 million, or 52 cents per share, compared with year-ago earnings of $26.2 million, or 44 cents per share. Jack in the Box operates or franchises 2,186 namesake quick-service restaurants and 480 Qdoba Mexican Grill fast-casual restaurants. The company also operates the 61-unit Quick Stuff convenience store chain, which it plans to sell. Latest results include Quick Stuff operations, which are earmarked as discontinued.
Second-quarter revenues fell 1.7 percent to $578.4 million, mainly because during the quarter, Jack in the Box sold 46 corporate restaurants to franchisees. The company netted $17.2 million, and also provided $3.3 million in bridge and mezzanine financing during the second quarter for two of the six refranchising deals.
For the first six months of the company’s October-ending fiscal year, a total of 75 Jack in the Box locations were refranchised, for a total of $35.6 million. The system is now 41 percent franchised, coming closer to the company’s target of having the system between 70 percent and 80 percent franchise operated by the end of 2013.
Second-quarter same-store sales for the Jack in the Box chain increased 0.4 percent, compared with a year-ago increase of 0.1 percent, the company said. Sister brand Qdoba, with 484-units, reported a same-store sales decline of 2.3 percent during the quarter and company officials blamed the challenging economic environment for the drop, as cash-strapped consumers trade down from restaurants with higher check averages, like the fast-casual Qdoba.
At Jack in the Box, officials credited the small uptick in sales trends to new menu initiatives, including the Mini Sirloin Burgers introduced in March, as well as the national introduction of the Teriyaki Bowls, tested during the first quarter in western stores, and the Homestyle Ranch Chicken Club, first introduced in central and eastern locations.
Jack in the Box also added a value-priced Taco Nachos product, and featured a limited-time promotion in February of two fish sandwiches for $3.
Jack in the Box chief executive Linda Lang said in a conference call with investors that the Mini Sirloins in particular were a hit because Jack in the Box is one of few quick-service operators to offer the slider-like burgers, which are more commonly a feature of casual-dining menus.
Because the Mini Sirloins also are favorable in terms of food costs and margins, the company is planning to extend the line into a new menu platform. New varieties of the Mini Sirloins are currently in development and test, she said.
“While other QSR chains reported weakening in March and April, we did not see that,” Lang said.
The company also plans to continue to focus promotional value offerings on bundled meals and coupons for new product launches. Lang said the company’s multi-tiered pricing system, with both premium products and value-priced items, “is really working for us.”
Still, cost controls and lower operating costs drove most of the company’s improved performance. Quarterly food and packaging costs fell nearly 1 percent from the prior year, and a 2.5-percent menu price increase taken in November also helped, officials said.
While beef costs rose 6.6 percent, compared with last year, the company’s overall commodity costs during the quarter increased just 3.3 percent, an improvement over the 8-percent inflation seen during the first quarter of 2009.
For the third quarter, officials said they expect Jack in the Box same-store sales to remain unchanged from a year earlier or up 2 percent. At Qdoba, same-store sales are expected to fall between 2 percent and 4 percent.
For the year, same-store sales also are projected to remain unchanged or increase 2 percent at Jack in the Box, and fall between 1 percent and 3 percent at Qdoba. Company officials are projecting earnings for the year from continuing operations to be total between $2.08 and $2.20 per share. In fiscal 2008, the company posted a profit of $2.01 per share.
Contact Lisa Jennings at [email protected].