Jack in the Box (JACK) Tops Q2 EPS by 15c

Jack in the Box (NASDAQ: JACK) reported Q2 EPS of $0.85, $0.15 better than the analyst estimate of $0.70. Revenue for the quarter came in at $361.15 million versus the consensus estimate of $360.22 million.

Jack in the Box system same-store sales were flat for the quarter, and lagged the QSR sandwich segment by 2.7 percentage points for the comparable period, according to The NPD Group’s SalesTrack® Weekly for the 12-week time period ended April 10, 2016. Included in this segment are 16 of the top QSR sandwich and burger chains in the country. Company same-store sales decreased 1.0 percent, with average check up 1.4 percent.

Qdoba same-store sales increased 2.1 percent system-wide and 3.1 percent for company restaurants in the second quarter. Company same-store sales reflected a 3.7 percent increase in transactions as well as growth in catering sales.

Lenny Comma, chairman and chief executive officer, said, “Operating earnings per share for the second quarter exceeded our expectations and guidance, and resulted primarily from healthy margins and cost controls combined with mark-to-market adjustments and a lower tax rate. We were pleased with the solid sales performance at Qdoba® company restaurants, which was driven by traffic growth, as well as with the improvement in labor costs and margins as compared to the first quarter.

"At the Jack in the Box® brand, system same-store sales were flat for the quarter as compared to an increase of 8.9 percent in the prior year. In late January, we introduced multiple upgrades to the core menu at our Jack in the Box restaurants system-wide, and in the latter half of the quarter, we featured the improved products in marketing messages at price points conveying both value and quality.

"We look forward to sharing our growth plans and strategies to enhance shareholder value at our upcoming investor meeting."

GUIDANCE:

Jack in the Box sees FY2016 EPS of $3.50-$3.63, versus the consensus of $3.51.

Third quarter fiscal year 2016 guidance

• Same-store sales ranging from approximately down 2.0 percent to flat at Jack in the Box company restaurants versus a 5.5 percent increase in the year-ago quarter. The low end of the sales guidance range reflects trends through the first four weeks of the third quarter which have been negatively impacted by heavy rainfall and flooding in Houston where 17 percent of Jack in the Box company restaurants are located.
• Same-store sales ranging from approximately down 1.0 percent to up 1.0 percent at Qdoba company restaurants versus a 6.6 percent increase in the year-ago quarter. Sales trends are tracking slightly below the low end of the guidance range due in part to adverse weather in key markets, but are expected to improve over the balance of the third quarter due to planned promotional activity.

Fiscal year 2016 guidance

• Same-store sales of approximately flat to up 1.0 percent at Jack in the Box company restaurants.
• Same-store sales increase of approximately 1.5 to 2.5 percent at Qdoba company restaurants.
• Commodity deflation of approximately 2 to 3 percent for Jack in the Box and approximately 5 percent at Qdoba.
• Consolidated restaurant operating margin of approximately 20.0 to 20.5 percent.
• SG&A as a percentage of revenue of approximately 13.0 to 13.5 percent as compared to 14.4 percent in fiscal 2015.
• Impairment and other charges as a percentage of revenue of approximately 80 basis points.
• Approximately 20 new Jack in the Box restaurants opening system-wide, the majority of which will be franchise locations.
• Approximately 50 to 60 new Qdoba restaurants, of which approximately half are expected to be company locations.
• Capital expenditures of $100 million to $120 million.
• Tax rate of approximately 38 percent.
• Operating earnings per share, which the company defines as diluted earnings per share from continuing operations on a GAAP basis excluding restructuring charges and gains or losses from refranchising, ranging from $3.50 to $3.63 in fiscal 2016 as compared to operating earnings per share of $3.00 in fiscal 2015. The estimated benefit of the 53rd week in fiscal 2016 is approximately $0.08 per diluted share.

For earnings history and earnings-related data on Jack in the Box (JACK) click here.

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