Jack in the Box Inc.
), recently posted third-quarter 2012 adjusted earnings of 37 cents
per share, outpacing the Zacks Consensus Estimate of 35 cents and
the year-ago quarter earnings of 25 cents per share. However,
including gains from refranchising and restructuring charges, GAAP
earnings per share came in at 26 cents compared with 25 cents in
the year-ago period.
During the quarter, total revenue dipped 3.4% year over year to
$501.8 million. The decline in revenue was attributable to a 12.5%
dip in restaurant sales to $285.4 million, resulting from the
company's strategy of selling company-owned restaurants to
franchisees. However, distribution revenue and franchised
restaurant revenue increased 10.4% to $138.8 million and 14.9% to
$77.6 million, respectively.
Jack in the Box's comparable store sales (comps) increased 2.8%,
driven by a 3.4% upside at company-owned restaurants and a 2.6%
rise at franchised restaurants. In the year-earlier quarter, comps
grew 3.2%. Higher customer visitation arising from the company's
continued focus on efficiency including improving the quality of
food and service is attributed to this growth.
Moreover, same-store sales at Qdoba's restaurant were up 2.1%
compared with 5.1% in the year-ago quarter, driven by a 3.3% upside
at company-owned restaurants and a 0.9% rise at franchised
Consolidated restaurant operating margin spiked 400 bps to 16.5%.
The expansion in margin was due to a 160 bps dip in food and
packaging costs, 100 bps cut in payroll and employee benefits costs
and a 140 bps fall in occupancy and other costs. Overall
commodity costs were approximately 1.0% higher in the quarter. The
company restaurant's operating margin at Qdoba was notably higher
during the quarter.
As of July 8, 2012, the company had a total of 2,247 Jack in the
Box and 614 Qdoba restaurants in its systems, of which 1661 and 310
were franchised, respectively.
At quarter end, Jack in the Box had cash and cash equivalents of
$10.8 million and long-term debt of $430.4 million.
The company did not buy back any shares during the second quarter.
The company currently has a share repurchase program worth $100
million, expiring in November, 2013.
For the fourth quarter of 2012, the company expects same-store
sales to increase in the range of 2%-3% at Jack in the Box company
restaurants and 1%-2% at Qdoba system restaurants.
For fiscal 2012, the company forecasts same-store sales to grow
4.0% to 4.5% at Jack in the Box restaurants and 2.5% to 3.0% at
Qdoba system restaurants. Overall commodity costs are expected to
increase 3.5% for 2012. Restaurants operating margin is estimated
to be 15.0%.
Earnings per share are estimated in the range of $1.48 and $1.58,
but excluding gains from refranchising, earnings are estimated to
be in between $1.12 and $1.22, higher than the previous guidance of
$1.02 to $1.17 per share.
The company plans to open 35 new Jack in the Box restaurants and 60
new Qdoba outlets in 2012. Of the total expected openings, 20
locations will be company-owned Jack in the Box properties and 25
to 30 will be Qdoba company-owned units.
San Diego-based Jack in the Box is in restructuring mode. We expect
the company to perform better on the back of unit growth, closure
of underperforming units, significant refranchising activities and
the transformation of ownership at the higher-margined Qdoba units,
from franchised to company level.
Its cost containment efforts also deserve a special mention.
Additionally, the deal to outsource its distribution business by
the end of the first quarter of 2013 bodes well for the investors.
JACK IN THE BOX (JACK): Free Stock Analysis
To read this article on Zacks.com click here.
However, continued lag in revenues remain a concern. Currently,
Jack in the Box retains a Zacks #3 Rank, which translates into a
short-term Hold rating. We are also maintaining our long-term
Outperform recommendation on the stock.