Jack in the Box Slumps on Weak Earnings and Comparable Sales

Services

Published: February 18, 2016 11:20 am

Last Updated: January 13, 2020 1:02 pm

Jack in the Box Inc. (NASDAQ: JACK) reported its fiscal first-quarter financial results after the markets closed on Wednesday. The company had $0.92 in earnings per share (EPS) on $470.8 million in revenue, which compares to consensus estimates of $1.03 in EPS on revenue of $476.4 million. In the same period of the previous year, it posted EPS of $0.93 and $468.6 million in revenue.

During the quarter, same-store sales increased 1.4%, driven by an increase of 1.8% in franchise same-store sales but held down by company same-store sales increasing 0.5%. The same period from the previous year had same-store sales increasing by 4.4% (3.9% for the company and 4.6% for franchise).

Jack in the Box repurchased roughly 1.274 million shares of its common stock in the first quarter of 2016 at an average price of $78.48 per share, for an aggregate cost of $100.0 million. There is $100.0 million remaining under in the current stock-buyback program, authorized by the board of directors in September 2015, that expires in November 2017.

In terms of guidance for the second quarter, the company expects same-store sales ranging from down 3.0% to flat, compared to a 7.4% increase in the year-ago quarter. The low end of the sales guidance for the second quarter reflects trends through the first four weeks as compared to the same period of the prior year, when sales growth exceeded 10%.

Lenny Comma, chairman and CEO of Jack in the Box, commented on earnings:

Our first quarter results were disappointing as operating earnings per share were below our expectations. At the Jack in the Box brand, margin expansion offset sales that were below our plan. Solid sales and traffic growth at Qdoba were hampered by lower than expected margins and some non-repetitive costs.

He continued:

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. 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.

Shares of Jack in the Box were trading down nearly 18% at $63.20 on Thursday, with a consensus analyst price target of $91.00 and a 52-week trading range of $62.20 to $99.99.