Jack in the Box third quarter earnings are another indicator quick-service brands are not immune to the economic recession. Jack in the Box has reported a decline in same-store sales like fellow Western U.S. brand Carl's Jr., although not to the same extent.
Same-store sales at Jack in the Box company restaurants were down 1.0 percent for the third quarter ended July 5, compared to a decrease of 0.4 percent in the same period last year. Sales during the quarter started off strong but deteriorated significantly near the end of the quarter, the company said in a news release.
Jack in the Box Inc. also reported systemwide same-store sales at its Qdoba Mexican Grill locations were down 2.8 percent in the third quarter vs. a year-ago increase of 0.5 percent, in-line with the company's guidance.
Revenues for the third quarter were down 2.7 percent at $575.7 million, compared to $591.9 million reported in the same period last year. Year to date, revenues were down 1.5 percent at $1.93 billion, compared to $1.96 billion last year.
Net income was down 34 percent to $19.6 million, compared to $29.9 million reported in the same period last year. Year to date, net income was down 15.8 percent to $77.8 million, compared to $92.4 million last year.
Third quarter 2009 results include a pre-tax loss of approximately $2.4 million, or 3 cents per diluted share, related to the expected sale of a lower-performing Jack in the Box company-operated market that is anticipated to close by the end of the calendar year.
As previously announced, the company expects to complete the sale of its 61 Quick Stuff convenience stores by the end of fiscal 2009 in multiple all-cash transactions. As a result, the company recorded an after-tax charge of $14.1 million in the third quarter.
"We're pleased with the improvement in restaurant operating margin and earnings despite the deceleration in sales during the quarter," said Linda A. Lang, chairman and chief executive officer. "The ongoing recession, which was exacerbated by higher unemployment and rising gas prices during the quarter, has consumers cutting back on their discretionary spending. In addition, we have seen aggressive discounting by not only quick-service competitors but other segments of the restaurant industry as well."
Third quarter initiatives for Jack in the Box
During the quarter, the company continued to execute its strategic initiative to reinvent the Jack in the Box brand. The initiative is expected to drive sales by offering guests a better restaurant experience than typically found in the quick-serve restaurant segment through menu innovation, enhanced restaurant facilities and improvements in guest service. Menu innovations included:
- In April, the enhanced line of Real Fruit Smoothies with a new Tropical flavor,
- In early June, an expanded mini burgers and sandwiches platform that included the addition of Mini Buffalo Ranch Chicken Sandwiches,
- Also in June, the debut of three Flavored Iced Teas – Mango, Peach and Raspberry.
A major element of the company's strategic initiative to reinvent the Jack in the Box brand is a comprehensive restaurant re-imaging program. Approximately 45 percent of the Jack in the Box system, including new construction, now features all interior and exterior elements of the program. Exterior enhancements, including new paint schemes, lighting and landscaping, are completed at 69 percent of the Jack in the Box system.
Fourth quarter guidance
Jack in the Box expects its same-store sales decline to continue at both brands for the fourth quarter. The company's guidance and underlying assumptions for the fourth quarter and fiscal year ending Sept. 27 include:
- 2.5 percent to 4.5 percent same-store sales decrease at Jack in the Box company restaurants versus a 0.8 percent decrease in the year-ago quarter
- 2 percent to 4 percent same-store sales decrease at Qdoba system restaurants versus a 1.0 percent decrease in the year-ago quarter
- Same-store sales guidance reflects trends experienced during the first four weeks of the fourth quarter
