Jack in the Box (JACK)
Q2 2010 Earnings Call
May 13, 2010 11:30 am ET
Jerry Rebel - Chief Financial Officer, Principal Accounting Officer and Executive Vice President
Linda Lang - Chairman, Chief Executive Officer, President and Chairman of Executive Committee
Lenny Comma - Chief Operating Officer and Senior Vice President
Carol DiRaimo - Vice President of Investor Relations & Corporate Communications
Matthew Van Vliet
Jeffrey Omohundro - Wells Fargo Securities, LLC
Conrad Lyon - Global Hunter Securities, LLC
Robert Derrington - Morgan Keegan & Company, Inc.
Matthew DiFrisco - Oppenheimer & Co. Inc.
Michael Wolleben - Sidoti & Company, LLC
Larry Miller - RBC Capital Markets Corporation
Thomas Forte - Telsey Advisory
Bart Glenn - D.A. Davidson & Co.
Joseph Buckley - BofA Merrill Lynch
Jeffrey Bernstein - Barclays Capital
Keith Siegner - Crédit Suisse
Christopher O'Cull - SunTrust Robinson Humphrey Capital Markets
Previous Statements by JACK
» Jack in the Box Inc. F1Q10 (Qtr End 01/17/01/10) Earnings Call Transcript
» Jack in the Box F4Q09 (Qtr End 9/27/09) Earnings Call Transcript
» Jack in the Box F3Q09 (Qtr End 7/5/09) Earnings Call Transcript
Good day, everyone, and welcome to the Jack in the Box Inc. Second Quarter Fiscal 2010 Earnings Conference Call. [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, Debbie, and good morning, everyone. Joining me on our call today are our Chairman, CEO and President, Linda Lang; our Executive Vice President and CFO, Jerry Rebel; and Senior Vice President and COO, Lenny Comma. During this morning’s session we'll review the company’s operating results for the second quarter of fiscal 2010 and update guidance for the remainder of the year. 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 Form 10-Q that will be filed later this week are considered a 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 presenting at RBC Capital Markets Consumer and Retail Conference in New York on June 3, and at the Oppenheimer's Consumer, Gaming, Lodging & Leisure Conference in Boston on June 29. Our third quarter ends on July 4 and we tentatively expect to announce results of the week of August 2.
With that, I'll turn the call over to Linda.
Thank you, Carol, and good morning. Our performance for the second quarter was generally in line with our overall expectations, excluding lower gains from refranchising due to the timing of a transaction that closed in the third quarter rather than in the second. Jerry will address that transaction and refranchising gains in his remarks this morning. Also Qdoba sales were better than our expectations, and in a few moments, I'll discuss what drove that improvement.
Same-store sales at Jack in the Box company restaurants decreased 8.6% compared with a year ago increase of 0.4%. A decrease was in line with the guidance we provided in February. We saw sequential improvement in both one- and two-year same-store sales trends in the second quarter, driven by improvement in transactions and average check. The average check in the quarter was lower than last year, which we attribute in part to several value promotions including the continuation of our $3.49 Jumbo Deal through February and two breakfast promotions: two croissant sandwiches for $3 and two breakfast biscuits for $3.
While we've seen an improvement in our California and Texas markets, we don't expect significant improvement in underlying fundamentals at Jack in the Box until high unemployment rates in these major markets for our key customer demographics begin to improve. Looking at our footprint, 44% of our restaurants are located in the 10 states with the highest unemployment while only 2% are in the states with the lowest unemployment.
In this environment, we continue to believe the best way for us to drive traffic is by targeting our advertising to reach multiple consumer segments with concurrent messages focusing on both value promotions and premium products. To continue our ad reach, we plan to increase our ad spend in the back half of the year. Throughout the economic slowdown, we've continued to reinforce our position as a premium brand with one of the most varied and innovative menus in QSR.
An excellent example of this is the new product platform we debuted in the second quarter, our Grilled Sandwiches. To drive trial of our new Grilled Sandwiches, on February 23, Jack in the Box offered a free grilled sandwich with the purchase of any large drink. Guest response was very good and there was a high attach rate. Our Grilled Sandwiches continue to sell well after the promotion and sustained a high percentage of our product sales mix.
In March, we introduced a new higher quality french fry, which are crispier and maintain their temperature longer. These fries have the operational benefit of a shorter cook time and longer hold time. We continue to maintain a robust pipeline of new products in various stages of development and test.
Early in the third quarter, Jack in the Box launched a Grilled Breakfast Sandwich that leveraged the popularity of our new Grilled Sandwiches. In April, we upgraded our coffee by introducing a new Kona blend for hot and iced coffee drinks. Kona has considerable brand equity among coffee drinkers and is consistent with our premium positioning.