Jack in the Box Inc.
) recently posted second-quarter fiscal 2013 adjusted earnings of
30 cents per share, missing the Zacks Consensus Estimate of 31
cents by 3.2% and comparable year-ago quarter's earnings by
37.5%. Earnings in the quarter were under pressure due to a lower
top line and higher commodity costs.
Quarterly revenues fell 2.8% year over year to $355.6 million
and also missed the Zacks Consensus Estimate of $360 million by
1.2%. Revenues in the quarter were affected by a 4.7% decline in
company restaurant sales, sluggish comparable restaurant sales
(comps) and tepid macroeconomic conditions, as well as lower
consumer expenditure, which in turn resulted in lower
Behind the Headline Number
Jack in the Box operates through its quick-service restaurant
chain, Jack in the Box, and fast-casual restaurants, Qdoba
System-wide Comps at Jack in the Box restaurants were
essentially flat, with a 0.9% upside at the company-owned
restaurants, offset by a 0.2% decline at franchised restaurants.
System-wide Comps were adversely affected by the slowdown in
consumer discretionary spending.
System-wide Comps at Qdoba's restaurant declined 1.5% due to
bad weather conditions. Both company-owned and franchised
restaurants contributed, declining 2.0% and 0.9%,
The company's consolidated restaurant operating margin
expanded 30 basis points (bps) year over year to 15.8%. The
expansion in margins was attributed to a 10 bps plunge in food
and packaging costs, a 90 bps dip in payroll and employee
benefits costs and a 60 bps decline in occupancy and other
expenses. The company's better menu pricing and positive product
mix also helped enhance the margin during the quarter.
During the quarter, three Jack in the Box and 15 Qdoba
restaurants were unveiled. The company has also acquired six
Qdoba restaurants from its franchisee.
At the end of the quarter, the company had 2,256 Jack in the
Box restaurants and 647 Qdoba units, of which, 2,017 were
Balance Sheet & Cash Flow
At the end of the quarter, cash and cash equivalent were $10.2
million versus $9.5 million in the first quarter.
Cash flows from operating activities is amounted to $1.2
billion as compared with $69.6 million in the year-ago
The company bought back 0.4 million shares worth $14.4 million
during the second quarter. Currently, $35.6 million worth of
shares remain under the existing share repurchase programs.
For the third quarter of 2013, comps will be up 1%-3% at the
Jack in the Box's company restaurants whereas comps at the Qdoba
restaurants will remain flat year-over-year.
The company has updated its guidance for fiscal 2013. Earnings
per share (restructuring charges and gains from refranchising
excluded) are estimated to be within $1.55 - $1.65, up from the
previous range of $1.48 - $1.63. The company expects comps to
grow by 1.5% - 2.5% at the Jack in the Box restaurants. Qdoba
company restaurants' comps will be roughly flat to up 1%.
The company has reduced its guidance for overall commodity
costs to 2% - 2.5% from 2% - 3%. The restaurants operating margin
is estimated to be 16.0%.
The company plans to unveil 20 new Jack in the Box restaurants
and 70-75 Qdoba outlets in fiscal 2013.
Due to weak industry sales, the San Diego-based Jack in the
Box restaurant chain is witnessing continuous decline in its
company sales and lower comps growth both at Jack in the Box and
Qdoba restaurants for the past two quarters. Commodity inflation
and a tepid macroeconomic outlook, which might affect footfall at
the restaurants, are expected to remain headwinds in the coming
However, Jack in the Box is in a restructuring mode. We expect
the company to perform better on the back of significant
refranchising activities and the transformation of ownership from
franchised to the company level at the higher-margined Qdoba
Currently, Jack in the Box retains a Zacks Rank #2 (Buy). Some
other restaurateurs like
) missed our estimates on both lines this season while
Yum! Brands Inc.
) beat earnings but missed out on revenues. Another company,
The Cheesecake Factory Inc.
) was ahead of estimates on both counts.
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