Jack In The Box Inc. (JACK)

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Jack in the Box (JACK)

Q3 2013 Earnings Call

August 08, 2013 11:30 am ET


Carol A. DiRaimo - Vice President of Investor Relations & Corporate Communications

Linda A. Lang - Chairman, Chief Executive Officer and Chairman of Executive Committee

Jerry P. Rebel - Chief Financial Officer, Principal Accounting Officer and Executive Vice President

Leonard A. Comma - President and Chief Operating Officer


Joseph T. Buckley - BofA Merrill Lynch, Research Division

Michael Tamas - Oppenheimer & Co. Inc., Research Division

John S. Glass - Morgan Stanley, Research Division

Alexander Slagle - Jefferies LLC, Research Division

Christopher T. O'Cull - KeyBanc Capital Markets Inc., Research Division

Matthew J. DiFrisco - Lazard Capital Markets LLC, Research Division

Jeffrey Andrew Bernstein - Barclays Capital, Research Division

David E. Tarantino - Robert W. Baird & Co. Incorporated, Research Division

Jeffrey D. Farmer - Wells Fargo Securities, LLC, Research Division

Conrad Lyon - B. Riley Caris, Research Division



Good day, and welcome to the Jack in the Box Inc. Third Quarter Fiscal 2013 Earnings Conference Call. Today's call is being broadcast live over the Internet. A replay of the call will be available on the Jack in the Box corporate website starting today. [Operator Instructions] At this time, for opening remarks and introductions, I would like to turn the call over to Carol DiRaimo, Vice President of Investor Relations and Corporate Communications for Jack in the Box. Please go ahead.

Carol A. DiRaimo

Thank you, Tanya, and good morning, everyone. Joining me on the call today are Chairman and CEO, Linda Lang; Executive Vice President and CFO, Jerry Rebel; and President and Chief Operating Officer, Lenny Comma.

During this morning's session, we'll review the company's operating results for the third quarter of fiscal 2013, as well as some of the guidance we issued yesterday for the fourth quarter and fiscal 2013. All of our comments this morning regarding per share amounts will refer to diluted earnings per share. And following today's presentation, we'll take questions from the financial community.

Please be advised that during the course of our presentation and our question-and-answer session today, we may make forward-looking statements that reflect management's expectations for the future, which are based on current information. Actual results may differ materially from these expectations based on risks to the business.

The Safe Harbor statement in yesterday's news release and the cautionary statement in the company's most recent Form 10-K are considered a part of this conference call. Material risk factors, as well as information relating to company operations, are detailed in our most recent 10-K, 10-Q and other public documents filed with the SEC. These documents are available on the Investors section of our website at www.jackinthebox.com.

A few calendar items to note. Jack in the Box management will be at presenting at the Wells Fargo Securities 2013 Retail and Restaurant Summit in Boston on October 1, and our fourth quarter and fiscal year ends on September 29, and we tentatively have planned to announce results on November 20 after the markets close. Our conference call is tentatively scheduled to be held at 8:30 a.m. Pacific Time on November 21.

And with that, I'll turn the call over to Linda.

Linda A. Lang

Thank you, Carol, and good morning. Jack in the Box recorded another solid quarter and we continue to make good progress on refranchising and other key strategic initiatives, including taking action to strengthen our Qdoba brand.

During the third quarter, same-store sales increased 1.2% at company Jack-in-the-Box restaurants. On a 2-year cumulative basis, company same-store sales were up 4.6%. Company restaurant same-store sales growth for the quarter exceeded that of the QSR sandwich segment by 1% for the comparable period, with systemwide same-store sales growth just slightly below the segment, according to NPD data. Breakfast and late-night were again our strongest day parts posting the largest year-over-year increases. Traffic for the quarter improved sequentially from the second quarter with transaction growth potentially flat compared with a year ago.

We introduced a number of new products across multiple platforms during the quarter, including Blueberry Muffin Oatmeal a Chipotle Chicken Club sandwich and a PiƱa Colada smoothie. Late in the quarter, we launched several limited time offers that we're promoting during our summertime Go Big campaign, including Jack's Big Stack Burger and an extension of our distinctive waffle breakfast sandwiches, the Big Waffle Stack.

During the quarter, we also expanded our beverage platform with iced coffees, which feature a unique blend of ingredients and have been popular additions to our permanent menu.

We attribute our ability to grow market share in this challenging environment to the investments we've made over the past few years to enhance our food, service and restaurant facilities, and we believe the foundation and catalyst in place to continue driving same-store sales and traffic growth over the long run.

The restaurant industry has seen some softness in sales in June and July and our fourth quarter guidance reflects the recent water industry trends. Company Jack in the Box same-store sales were down in July, which was our toughest compare of the quarter. We've made some adjustments to our promotional calendar to emphasize value bundles in this environment, like the $3.99 Really Big Chicken Sandwich combo that we launched last week. And we expect company Jack in the Box same-store sales to be slightly positive in the fourth quarter.

Turning to Qdoba. Our company-operated restaurant reported same-store sales increase of 0.5% in the third quarter. On a 2-year basis, same-store sales accelerated more than 200 basis points, increasing 4.3% with 100 basis points of lower pricing. During the quarter, our catering business increased 7.5% versus last year and average check increased 10.5% over quarter 2. In June we announced plans to close 67 company-operated restaurants following a comprehensive review of market performance. We closed 52 of those locations prior to the end of the third quarter. We transferred 3 Qdobas to a franchisee in the fourth quarter and 2 locations were closed when their leases expired.

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