Jack in the Box Remains Strong
- By Mrinalini Chaudhuri
Jack in the Box Inc. (JACK), based in San Diego, is a restaurant company that operates and franchises Jack in the Box restaurants and Qdoba Mexican Eats.
The company recently reported second quarter results with operating earnings per share exceeding the managementas expectations. It has distinguished itself from its peers and has been able to carve a niche for itself. It is making continuous efforts to reposition itself in the fast-food industry. The company witnessed solid sales performance at Qdoba company restaurants, which was driven by traffic growth. Jack in the Box brand witnessed flat same-store sales during the quarter.
-
Warning! GuruFocus has detected 4 Warning Sign with JACK. Click here to check it out.
-
The intrinsic value of JACK
Second quarter results
Earnings from continuing operations during the second quarter were $29 million, or 85 cents per diluted share, which was $23.4 million, or 61 cents per diluted share during the prior year quarter.
Operating earnings per share during the second quarter was 85 cents, up from 69 cents in the prior year quarter.
Restaurant operating margin for Jack in the Box restaurants decreased by 70 basis points and was 20.7% of sales. Restaurant operating margin for Qdoba decreased by 50 basis points and was 18.3% of sales during the quarter.
Franchise margin as a percentage of total franchise revenues improved to 53.8% in the second quarter, up from 51.7% in the prior year quarter.
SG&A expense for the second quarter decreased by $5.6 million and was 13% of revenues.
Dividends
The company declared a quarterly cash dividend of 30 cents per share on the companyas common stock. The dividend is payable on June 7 to shareholders of record at the close of business on May 24.
Share repurchases
The company repurchased approximately 2,177,000 shares of its common stock in the second quarter of 2016 at an average price of $68.90 per share for an aggregate cost of $150 million.
In May the board of directors authorized an additional $100 million stock buyback program that also expires in November 2017.
Expectations
| Metrics | Range | |
| A | Third Quarter | Full Year 2016 |
| Same-store sales | To range from approximately down 2.0% to flat at Jack in the Box company restaurants | To range approximately flat to up 1.0% at Jack in the Box company restaurants |
| Same-store sales | To range from approximately down 1.0% to up 1.0% at Qdoba company restaurants | To range approximately 1.5% to 2.5% at Qdoba company restaurants. |
| Consolidated restaurant operating margin | A | To range between 20% to 20.5% |
| SG&A as a percentage of revenue | A | To range between 13% to 13.5% |
| Capex | A | To be between $100 million to $120 million |
| Tax rate | A | To be approximately around 38% |
| Restaurant openings | A | The company plans to open 50 to 60 new Qdoba restaurants |
Strong attributes of the quarter
-
Traffic growth
-
Increased sales performance at Qdoba company restaurants
-
It introduced multiple upgrades to the core menu at Jack in the Box restaurants system-wide
-
Operating earnings per share exceeded expectations
-
Healthy margins