Jack in the Box Inc., said on Wednesday that McDonald’s Corp.’s all-day breakfast promotion hurt the company’s sales in its fiscal first quarter ended Jan. 17.
Same-store sales at the San Diego-based, 2,253-unit burger chain rose 1.4 percent in the period, which was lower than the company expected. The chain attributed the weakness to competition from other burger concepts.
Jack in the Box stock was down 20 percent in after-hours trading Wednesday.
“Jack in the Box sales in the last part of the quarter were lower than we anticipated as several competitors began promoting aggressive value offers,” Jack in the Box CEO Lenny Comma said in a statement.
“We also experienced weakness at breakfast and lunch throughout the quarter, which we attribute primarily to our decision to shift the timing of some of our promotional activity around breakfast to the second quarter as compared to the first quarter of last year.
“In addition, we believe a competitor’s messaging around its launch of all-day breakfast had some impact on our results, particularly in the 10:30 a.m. to noon period.”
McDonald’s launched all-day breakfast in October, selling a selection of nine items after its traditional 10:30 a.m. shift to lunch. It was widely given credit for the chain’s 5.7-percent same-store sales increase in the last three months of 2015.
That move was particularly viewed as a challenge for Jack in the Box, which sells all-day breakfast.
It also shows the growing competition from chains offering various deals — Wendy's and Burger King as well as McDonald’s all started the year promoting value offers.
Comma said that Jack in the Box introduced multiple upgrades to its core menu to drive sales. “We are confident in our ability to drive profitable sales growth and brand loyalty over the long-term by balancing our messages to include both higher quality, more craveable food along with differentiated value offerings,” Comma said.
Same-store sales at Jack in the Box’s 674-unit Qdoba brand increased 1.8 percent, though that chain was running up against tough comparisons from a year ago of 14 percent. The chain did not get any lift, as some might have expected, from weakness at competitor Chipotle Mexican Grill.
Still, Comma said, “Solid sales and traffic growth at Qdoba were hampered by lower than expected margins and some non-repetitive costs.”
The company said it is analyzing plans to “increase shareholder value” and plans to increase franchise ownership in the Jack in the Box brand to “at least 90 percent,” suggesting the company will sell more company-owned restaurants to franchisees.
It also plans to reduce general and administrative spending to 3 percent of systemwide sales. The company is targeting completion of those efforts over the next two years.
Net earnings at the company fell 7.3 percent to $33.2 million or 94 cents in the period, from $35.8 million, or 93 cents in the same period a year before. Revenues rose 0.5 percent to $470.8 million from $468.6 million.
Contact Jonathan Maze at [email protected].
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