Jack In The Box's Sales Rebound Depends On Jobs
June 29 2010 - 11:13AM
Dow Jones News
Jack in the Box Inc.'s (JACK) sales won't improve until
unemployment eases in the company's largest markets and among key
demographic groups such as young men and Hispanics, Chief Financial
Officer Jerry Rebel said Tuesday.
Until that happens, sales at Jack in the Box's namesake burger
chain and at its fast-casual Mexican chain Qdoba will likely
continue to diverge.
Jack in the Box, whose same-store sales fell 8.6% in its second
quarter, has been struggling mightily since last summer, as
unemployment levels in large markets such as California and Texas
remain high. Jack in the Box is also being hit by high unemployment
rates among Hispanics, a demographic from which the chain draws a
larger percentage of customers than competing chains like Burger
King Holdings Inc. (BKC) and McDonald's Corp. (MCD), Rebel
said.
"Unfortunately, most unemployed folks don't go out to eat,"
Rebel said at an Oppenheimer & Co. investor conference.
Qdoba's sales have held up better, rising 3.1% in the company's
recent quarter, mainly since Qdoba targets a higher end consumer
more willing to spend.
"Those consumers are coming back," Rebel said.
Rebel said that Qdoba's unit growth has been slowed somewhat by
a slowdown in developments of lifestyle centers, or open-air real
estate developments.
Jack in the Box has been coping with a sales slowdown by
trimming costs and promoting "margin-friendly" products like
bundles that pair high-margin sides like drinks and fries with
sandwiches.
It is also selling off company-owned stores to franchisees as
part of a long-term restructuring plan. Rebel said Jack in the Box,
which now owns 54% of its 2,200 stores, will reduce its ownership
below the 50% level sometime in the third quarter.
Rebel said that the company is "comfortable with our commodity
cost estimates" for the remainder of the fiscal year, as beef costs
have eased slightly. Last quarter, the company said it expects
commodity costs to rise 2% in the third quarter and 3% in the
fourth quarter from a year earlier.
Jack in the Box shares were down 12 cents recently at $19.76,
and are down nearly 12% over the last year.
-By Paul Ziobro, Dow Jones Newswires; 212-416-2194;
paul.ziobro@dowjones.com
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