News

Jack in the Box Q2 results fall behind overall sandwich segment

May 13, 2016

Jack in the Box Inc, which owns Qdoba, reported that operating earnings per share for Q2 exceeded the company's expectations, despite announcing that system same-store sales were flat for the quarter, lagging behind the QSR sandwich segment by 2.7 percentage points. The company's earnings per share were $0.85 in the second quarter of fiscal 2016, compared with $0.69 in the prior year quarter, according to a company press release.

"We were pleased with the solid sales performance at Qdoba company restaurants, which was driven by traffic growth, as well as with the improvement in labor costs and margins as compared to the first quarter," said Lenny Comma, chairman and chief executive officer.

Comma said that system same-store sales were flat for the quarter as compared to an increase of 8.9 percent in the prior year at the Jack in the Box, but in late January, the brand introduced multiple upgrades to the core menu

"In the latter half of the quarter, we featured the improved products in marketing messages at price points conveying both value and quality," he said. "We look forward to sharing our growth plans and strategies to enhance shareholder value at our upcoming investor meeting."

Q2 Highlights

• Jack in the Box system same-store sales were flat for the quarter, lagging the QSR sandwich segment by 2.7 percentage points for the comparable period, according to NPD Group.
• Company same-store sales decreased 1 percent with average check up 1.4 percent.
• Qdoba same-store sales increased 2.1 percent system-wide and 3.1 percent for company restaurants in the second quarter.
• Company same-store sales reflected a 3.7 percent increase in transactions as well as growth in catering sales.
• Consolidated restaurant operating margin decreased by 70 basis points to 19.9 percent of sales in the second quarter of 2016, compared with 20.6 percent of sales in the year-ago quarter.
• Restaurant operating margin for Jack in the Box company restaurants decreased 70 basis points to 20.7 percent of sales.
• Restaurant operating margin for Qdoba company restaurants decreased 50 basis points to 18.3 percent of sales, as costs associated with a greater number of new restaurant openings and higher promotional activity more than offset the sales growth and benefits from commodity deflation of approximately 4.6 percent in the quarter.
• Franchise margin as a percentage of total franchise revenues improved to 53.8 percent in the second quarter from 51.7 percent in the prior year quarter.
• SG&A expense for the second quarter decreased by $5.6 million and was 13 percent of revenues as compared to 14.7 percent in the prior year quarter.

The company repurchased approximately 2,177,000 shares of its common stock in the second quarter of 2016, at an average price of $68.90 per share for an aggregate cost of $150 million. In May 2016, the company's board of directors authorized an additional $100 million stock buy-back program that also expires in November 2017.

Q3 predictions:

• Same-store sales ranging from approximately down 2 percent to flat at Jack in the Box company restaurants versus a 5.5 percent increase in the year-ago quarter
• Same-store sales ranging from approximately down 1 percent to up 1 percent at Qdoba company restaurants versus a 6.6-percent increase in the year-ago quarter.