Jack in the Box 1Q profit increases 73%

Jack in the Box Inc. reported on Wednesday first-quarter net income that was nearly double that of last year, indicating that restructuring efforts are taking hold.

Like several other restaurant companies reporting this week, however, Jack in the Box officials said sales dropped precipitously in January as consumers faced higher payroll taxes, delayed tax refunds and higher gas prices.

However, in a call with analysts Thursday, Linda Lang, the company's chair and chief executive, said the slowdown is already showing improvement and that sales will pick up later in the year. “We think consumers will adjust,” she said. “We’re confident that the macro impact is temporary, though that is uncertain.”

Over the past few years, Jack in the Box has worked on its menu, upgrading the quality of core items, improving speed of service and promoting the value of bundled meals instead of battling with competitors in the dollar-menu wars. The company has also been restructuring its business, refranchising 650 company-owned locations over the past three years, outsourcing the distribution business and cutting costs.

Though traffic was roughly flat for the quarter, Lang said the Jack in the Box chain’s systemwide same-store sales rose 1.9 percent, which exceeded the quick-service sandwich segment trends, according to NPD Group’s Sales Track Weekly.

Jack in the Box's same-store sales rose 2.1 percent at company-owned restaurants, and they rose 1.8 percent at franchise locations. Lang said the same-store sales increases were across all dayparts, with breakfast showing the largest year-over-year increase.

At sister brand Qdoba Mexican Grill, systemwide same-store sales increased 1 percent, rising 1.5 percent at company restaurants and 0.5 percent at franchise units. The increase was driven by growth in both transactions and in catering, the latter now accounting for about 6.5 percent of sales. “We believe we can significantly grow this part of our business,” Lang said of Qdoba catering.

Driving traffic at Qdoba

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This week Qdoba is rolling out a new brown rice option, spiced with garlic, chiles, roasted tomatoes and onions, Lang said.

Later this year, the company is also planning to launch a new marketing campaign in the second half of the year for Qdoba that will focus on the chain’s differentiated menu and craveable food, mostly on radio and through digital/social media.

“One of our key priorities for 2013 is to drive traffic at Qdoba, and we believe our promotional efforts aimed at differentiating the brand resulted in the improvement in traffic and sales trends” for the quarter, Lang said.

Qdoba is still on the hunt for a new president to replace retiring president and chief executive Gary Beisler, and Lang said the company is not ready to announce a selection.

For the 16 weeks ended Jan. 20, the company reported net income of $20.7 million, or 47 cents per share, an increase of 73 percent compared with  $12 million, or 27 cents per share, a year ago. The results included restructuring charges of about $0.8 million, or 1 cent per share, as well as a $3.3 million after-tax charge related to the outsourcing of the distribution business.

Revenue totaled $465.5 million for the quarter compared with $457.9 million last year.

Nine new Jack in the Box locations opened during the quarter, including six franchised units, for a total of 2,255 units systemwide.

During the quarter, 17 Qdoba locations opened, of which 14 were franchised, for a systemwide total of 636. The company also acquired six Qdoba restaurants from franchisees during the quarter.

For the second quarter, officials expect same-store sales to be flat at company-owned Jack in the Box units, and flat to a decrease of 2 percent at company-owned Qdoba restaurants.

Lowering its outlook for the year at company-owned restaurants, officials expect same-store sales to increase 1.5 percent to 2.5 percent at Jack in the Box and to increase 1 percent to 2 percent at Qdoba. Previously the company has projected 2 percent to 3 percent increases for both brands.

About 20 to 25 new Jack in the Box units will open during the year, including 10 company-owned restaurants. The company is also planning to open 70 to 85 Qdobas, of which about 40 to 45 will be company owned.

Contact Lisa Jennings at [email protected]
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