Jack in the Box, Inc. (JACK)
F4Q2010 (Qtr End 10/03/10) Earnings Conference Call
November 23, 2010 11:30 AM ET
Carol DiRaimo – VP, IR and Corporate Communications
Linda Lang – Chairman, CEO and President
Jerry Rebel – EVP and CFO
John Glass – Morgan Stanley
Chris O’Cull – SunTrust Robinson
Matthew DiFrisco – Oppenheimer
Jeffrey Bernstein – Barclays Capital
Keith Seigner – Credit Suisse
Jeff Omohundro – Wells Fargo
Jake Bartlett – Susquehanna
Paul Westra – Cowen & Company
Joe Buckley – Bank of America Securities
Matt Van Vliet – Stifel Nicolaus
Previous Statements by JACK
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Good day everyone, and welcome to the Jack in the Box Inc. Fourth Quarter Fiscal 2010 Earnings Conference Call. Today’s call is being broadcasted live over the internet. A replay of the call will be available on the Jack in the Box corporate website starting today. (Operator Instructions) At this time, for opening remarks and introductions, I would like to turn the call over to Carol DiRaimo, Vice President of Investor Relations and Corporate Communications for Jack in the Box. Please go ahead.
Thank you, Stacy, and good morning everyone. Joining me on the call today are our Chairman, CEO and President, Linda Lang; Executive Vice President and CFO, Jerry Rebel; and Chief Operating Officer, Lenny Comma who has been promoted to Executive Vice President last week.
During this morning’s session, we’ll review the company’s operating results for the fourth quarter of fiscal 2010 and discuss guidance for the first quarter and fiscal 2011. We will refer to non-GAAP measures during our discussion and a reconciliation is posted on our website at investors.jackinthebox.com in the presentations and webcast sections. Following today’s presentation, we’ll take questions from the financial community.
Please be advised that during the course of our presentation and our question-and-answer session today, we may make forward-looking statements that reflect management’s expectations for the future, which are based on current information. Actual results may differ materially from these expectations based on risks to the business. The Safe Harbor statement in yesterday’s news release and the cautionary statement in the company’s most recent Form 10-Q are considered part of this conference call.
Material risk factors, as well as information relating to company operations, are detailed in our most recent 10-K, 10-Q and other public documents filed with the SEC. These documents are available on the Investors section of our website at www.jackinthebox.com.
A few calendar items to note. Jack in the Box management will be participating in the Credit Suisse Holiday Conference in Orlando on December 7, presenting at Cowen and Company’s Ninth Annual Consumer Conference in New York on January 11. Our first quarter ends on January 23 and we tentatively expect to announce results in the week of February 21. With that, I’ll turn the call over to Linda.
Thank you Carol, and good morning. In the fourth quarter, the 4% decrease in same-store sales at Jack in the Box company restaurants was slightly better than our guidance range, and an improvement from the 9.4% decrease we saw in the third quarter. Of the 540 basis point improvement in sales, we saw a 250 basis points sequential improvement in traffic and a 290 basis points sequential improvement in average check compared to the third quarter.
The increase in average check was driven primarily by mix as the promotions we ran during the quarter generated a good response. California remained our best performing market this quarter and we were encouraged to see improvement in Texas, our biggest company market which was on-par with California on a two year basis. We also began reporting Jack in the Box franchise same-store sales this quarter which were down 2.8% versus last year.
We remained focused on enhancing the entire guest experience in order to earn their next visit. We believe the investments we have made to deliver more consistent service, improve the quality of our signature products and enhance our facilities are beginning to resonate with our guests. During the fourth quarter at Jack in the Box, we implemented a comprehensive program to improve guest service by delivering a more consistent dining experience. Along with evaluating restaurant performance via our Voice of Guest surveys additional resources are being committed to more closely measure how restaurants are executing the key drivers of guest satisfaction.
This is a system-wide effort that is being enthusiastically embraced by both our franchise and company operators. Over the years, we have created one of the most varied and innovative menus in the QSR industry. At the heart of this menu, our core products that have been guest favorites for many years especially among our most frequent customers. By improving these core products, we believe we can reengage lost customers and create an even broader appeal for these guest favorites.
We took steps in 2010 to improve several staples on our menu. In April, we introduced new French fries and a new premium blend of coffee named with real Kona beans. Next step were our tacos, which is our top selling menu item. We recently improved our tacos and last Tuesday we had a free taco giveaway at our restaurants. We had an incredible response and generate a trail of more than 4.5 million tacos or more than 2,000 tacos per restaurant.
The next improvement impacts several products. We’ve rolled out a new hickory
smoked bacon that really adds flavor to our products ranging from Croissants and Breakfast Sandwiches to Chicken Sandwiches and Premium Burgers. There are still more improvements to come and we’ll be communicating these enhancements in our promotional messaging to make our guests aware of the changes.