Jack In The Box's Sales Rebound Depends On Jobs

Date : 06/29/2010 @ 11:13AM
Source : Dow Jones News
Stock : Jack IN The Box Inc. (JACK)
Quote : 93.99  -1.0 (-1.05%) @ 4:22PM

Jack In The Box's Sales Rebound Depends On Jobs

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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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