Jack in the Box Inc.'s second quarter '11 earnings yielded a big drop in net earnings from the same period last year, from $6.8 million compared to $17.7 million in 2010.
The company's earnings are at $0.13 per diluted share compared to $0.32 per diluted share for Q210.
Despite the profit loss, Jack in the Box's company-owned same-store sales were up 0.8 percent in the quarter, which beat expectations.
"On a two-year basis, we're continuing to see sequential improvement in same-store sales with three consecutive quarters of improving trends. We believe the investments we have made in the business to enhance the entire guest experience, along with employment growth, will drive improved sales results at the Jack in the Box brand," said Linda A. Lang, chairman, CEO and president.
Qdoba's same-store sales in the quarter continued upward, increasing 6 percent systemwide. Lang said these results were driven largely by transaction growth and higher catering sales.
The chains' combined operating margin was 12.3 percent of sales, compared with 15.2 percent of sales in the year-ago quarter.
Commodity prices hit bottom line
As is the industry-wide trend, food and packaging costs in the quarter were 190 basis points higher than prior year. Overall commodity costs were approximately 5 percent higher in the quarter, driven by higher costs for beef, produce, cheese, pork, dairy and shortening.
Payroll and employee benefits costs were 30.5 percent of restaurant sales versus 30.2 percent in the year-ago quarter, reflecting higher levels of staffing designed to improve the guest experience. In addition, higher unemployment taxes resulting from rate increases in several states negatively impacted payroll and employee benefit costs.
Restaurant openings
Eight new Jack in the Box restaurants opened in the second quarter, including six franchised locations, compared with 11 new restaurants opened systemwide during the same quarter last year, of which four were franchised.
In the second quarter, 10 Qdoba restaurants opened, including five franchised locations, versus four new restaurants in the year-ago quarter, of which three were franchised.
As of April 17, the company's system total comprised 2,220 Jack in the Box restaurants, including 1,372 franchised locations, and 549 Qdoba restaurants, including 328 franchised locations.
Looking ahead
For the third quarter, same-store sales are expected to increase approximately 2 to 4 percent at Jack in the Box company restaurants versus a 9.4 percent decrease in the year-ago quarter.
Same-store sales are expected to increase approximately 4 to 6 percent at Qdoba system restaurants versus a 4.6 percent increase in the year-ago quarter.
For the entire fiscal year 2001, same-store sales are expected to increase approximately 1 to 3 percent at Jack in the Box company restaurants, and approximately 4 to 6 percent at Qdoba system restaurants.
Overall commodity costs are now expected to increase by 4.5 to 5.5 percent for the full year.
