Jack In The Box Inc. (JACK)

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Jack in the Box (JACK)

Q3 2011 Earnings Call

August 11, 2011 12:00 pm ET


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

Linda Lang - Chairman, Chief Executive Officer, President and Chairman of Executive Committee

Carol DiRaimo - Vice President of Investor Relations & Corporate Communications

Leonard Comma - Chief Operating Officer and Executive Vice President


Peter Saleh - Telsey Advisory Group LLC

Keith Siegner - Crédit Suisse AG

Jeffrey Omohundro - Wells Fargo Securities, LLC

John Glass - Morgan Stanley

Jake Bartlett - Susquehanna Financial Group, LLLP

Conrad Lyon - B. Riley & Co., LLC

Steve West - Stifel, Nicolaus & Co., Inc.

Jeffrey Bernstein - Barclays Capital

Joseph Buckley - BofA Merrill Lynch

Jonathan Komp - Robert W. Baird & Co. Incorporated

Unknown Analyst -



Good day, everyone, and welcome to the Jack in the Box Inc. Third Quarter Fiscal 2011 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 DiRaimo

Thank you, Stacy, and good morning, everyone. Joining me on the call today are our Chairman, CEO and President, Linda Lang; Executive Vice President and CFO, Jerry Rebel; and Executive Vice 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 2011 and update our guidance for the remainder of the year. 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's management will be participating in the Telsey Advisory Group's Fall 2011 Consumer Conference in New York on September 27, and our fourth quarter and fiscal 2011 ends on Sunday, October 2. We tentatively plan to announce results on Monday, November 21 after the market close, with our conference call to be held at 8:30 a.m. Pacific Time on Tuesday, November 22.

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

Linda Lang

Thank you, Carol, and good morning. We are very pleased with the third quarter results we reported yesterday. The 4.7% increase in same-store sales at company Jack in the Box restaurants exceeded our expectations and was driven by strong traffic growth, up 3.4%, and an increase in average checks. The increase represented our fourth consecutive quarter of sequentially improving trends in sales on a 2-year basis. All of our major markets posted strong same-store sales growth for the third quarter, including California, Texas and Arizona. Year-over-year, we saw same-store sales increases across all day parts during the third quarter. Systemwide Jack in the Box same-store sales growth for the quarter exceeded that of the QSR sandwich segment for the comparable period according to the NPD Group's sales track weekly. Included in this segment are the top 11 sandwich and QSR burger chain competitors.

We believe our improving sales trends are a result of the holistic approach we've taken to improve the guest experience at our restaurants by focusing on enhancing our menu, guest service and the restaurant environment.

As expected, high commodity costs continued to pressure restaurant margins, which Jerry will discuss in a minute. To offset some of these inflationary pressures, we took a 1.4% price increase at company Jack in the Box restaurants in mid May. We continued to be cautious on taking price in this environment given our focus on driving traffic. And we considered both the competitive landscape, as well as grocery store inflation in our pricing decision.

Our marketing calendar in the third quarter featured a combination of value promotion and a premium product introduction. We concluded our $4.99 All-American Jack combo early in the third quarter before launching a premium product extension of our popular Grilled Sandwich line, the Bourbon BBQ Steak Grilled sandwich, a limited time offer at the end of April.

The quarter also featured a 3-taco combo meal, value priced between $2.99 and $3.49 depending on the market. And late in the quarter, we reintroduced our popular Really Big Chicken Sandwich combo, which is priced at $3.99, including seasoned curly fries and a drink.

To help our guests more easily navigate our menu while showcasing our variety, we installed new menu boards throughout our system in June. The new menu boards also highlight average check builders while encouraging trial and sales of higher-margin products.

We continued to make great progress on the comprehensive reimaging program we've been implementing at restaurants throughout our system. At the end of the third quarter, nearly 1,600 restaurants, or 72% of our system, featured the interior and exterior elements of this program. With 88% of company restaurants reimaged and 64% of franchise locations, we remain on pace to substantially complete our restaurant reimaging program systemwide by the end of the calendar year.

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