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Jack-in-the-Box beats estimates as value pricing boosts sales

February 21, 2019

Jack in the Box Inc. reported better-than-expected earnings during the fiscal first-quarter as the burger chain benefitted from lower costs and positive responses to its value-oriented pricing strategy.

The company reported operating earnings per $1.35 per share for the quarter ended Jan. 20, beating Wall Street estimates, while revenue also beat quarterly estimates.

CEO Lenny Comma told analysts that same-store sales turned around after a weak start during the quarter, adding that the company focused on a more value-oriented approach and the company did not want to get into deep discounting of its menu items, particularly as labor costs continue to increase.

"Value for us is different than what others are selling," he told analysts on the call.

Same-store sales at company-owned locations rose 0.5 percent for the quarter, compared with an 0.2 percent increase in the year-ago quarter, due to an increase in average check growth. Overall sales, however, fell 0.1 percent in the quarter, compared with a decrease of 0.2 percent in the year-ago quarter, according to the report.

He said the company also decided to pursue alternative advertising on social media rather than Super Bowl advertising.

Earnings from continuing operations for the period of $31.1 million or $1.19 per diluted share, compared with $12.9 million, or $0.43 per diluted share, for Q1 2018, according to the earnings report.  

Revenue fell to $290.8 million, compared with $294.5 million in the year-ago quarter. Quarterly revenue was expected to come in at $286 million, according to Zack’s.

The company reported restructuring costs of $5.8 million, or 17 cents a share, in the quarter, mainly due to severance costs and the company’s evaluation of strategic alternatives.

Company executives said they are continuing to explore a potential sale as well as plans to increase leverage, and have held discussions with potential buyers.

The company is forecasting same-store sales for the fiscal year will be flat to up 2 percent. The company expects to open 25 to 35 locations systemwide, mostly franchise locations.