Jack in the Box Profits Tumble in Q2, Narrows Fiscal 2013 Outlook

Andrew Klips |

Jack in the BoxJack in the Box, Inc. (JACK), the operator of its namesake and Qdoba brand restaurants, reported after Wednesday’s closing bell that sales and earnings declined in the fiscal second quarter. Wall Street expected the drop, actually to a worse degree with regards to profits, as the comparable quarter last year were inflated by asset sales.

For the quarter ended April 14, San Diego-based Jack in the Box reported revenue of $355.6 million, down from $366.5 million in the year prior quarter. Earnings from continued operations were $13.3 million, or 29 cents per share, versus earnings of $21.6 million, or 48 cents per share, in the second quarter last year. On an adjusted basis, which excludes restructuring charges and impacts from refranchising, the company earned 33 cents per share, compared to 30 cents per share in last year’s quarter.

Wall Street was anticipating adjusted profits of 31 cents per share on revenue of $358.9 million.

During the quarter, the company took a pre-tax loss of $2.7 million, or about 4 cents per share, because of the expected sale of 16 restaurants anticipated to be completed by the end of fiscal 2013. Refranchising restaurants cost earnings about 3 cents per share in the recent quarter, compare to a benefit of approximately 21 cents per share last year.

Same-store-sales at corporate-owned Jack in the Box locations improved by 0.9 percent compared to last year’s quarter, although sales at franchise locations declined by 0.2 percent, lending to an overall system performance of a 0.1 percent increase in sales. Qdoba locations fall in both segments, totaling a system decline of 1.5 percent in comparable store sales.

“Qdoba same-store sales in the second quarter decreased 2.0 percent for company restaurants, and were adversely affected by more severe winter weather in the quarter than last year, which we believe resulted in approximately 150 basis points of unfavorable impact,” said Linda Lang, chairman and chief executive at Jack in the Box.

The Qdoba arm also suffered a 340 basis point decline in operating margin to 12.2 percent of sales. Jack in the Box store operating margin improved by 160 basis points to 17.1 percent of sales. Company-wide, operating margin increased to 15.8 percent of sales (from 15.5%) while restaurant costs were shaved by 5 percent.

During the quarter, the company repurchased 421,000 shares for an aggregate amount of $14.4 million.

Looking ahead, Jack in the Box said that it expects earnings in the range of $1.55 to $1.65 per share for the fiscal year. Earlier this year, the company guided a range of $1.48 to $1.63 per share. The Wall Street consensus was for EPS of $1.61.

Leading into the second quarter, Jack in the Box had been on a roll, notching four straight quarters of double-digit profit growth, reversing nearly two years of quarterly declines in earnings. Share appreciation has been reflective of the rising earnings with shares growing more than 70 percent in the past 12 months. In 2013 alone, shares are up about 35 percent as on the close of trading on Wednesday.

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Symbol Name Price Change % Volume
FEUZ First Trust Exchange Traded AlphaDEX Fund II Eurozone Alphadex ETF 31.60 -0.26 -0.80 417
JACK Jack In The Box Inc. 91.57 -0.37 -0.40 498,436


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