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Jack in the Box (JACK)

Q1 2012 Earnings Call

February 23, 2012 11:30 am ET


Carol A. DiRaimo - Vice President of Investor Relations & Corporate Communications

Linda A. Lang - Chairman, Chief Executive Officer, President and Chairman of Executive Committee

Jerry P. Rebel - Chief Financial Officer, Principal Accounting Officer and Executive Vice President


Jeffrey Andrew Bernstein - Barclays Capital, Research Division

Matthew J. DiFrisco - Lazard Capital Markets LLC, Research Division

John S. Glass - Morgan Stanley, Research Division

Joseph T. Buckley - BofA Merrill Lynch, Research Division

Keith Siegner - Crédit Suisse AG, Research Division

Christopher T. O'Cull - SunTrust Robinson Humphrey, Inc., Research Division

Conrad Lyon - B. Riley & Co., LLC, Research Division

Larry Miller - RBC Capital Markets, LLC, Research Division

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Good day, everyone, and welcome to the Jack in the Box Inc. First Quarter Fiscal 2012 Earnings Conference Call. Today's call is being broadcast 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.

Carol A. DiRaimo

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 Executive Vice President and COO, Lenny Comma. During this morning session, we'll review the company's operating results for the first quarter of fiscal 2012 and update our 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 most recent Form 10-K 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

A few calendar items to note. Next week, on February 28, Jack in the Box's management is holding an Investor Meeting in San Diego, which will be webcast live beginning at 9 a.m. Pacific Time. Jack in the Box's management will also be participating in RBC Capital Markets Restaurant and Leisure Conference in Deer Valley, Utah on March 1, the Bank of America Merrill Lynch Consumer & Retail Conference in New York on March 8 and the J.P. Morgan Gaming, Lodging, Restaurant & Leisure Management Access Forum on Las Vegas on March 28. Our second quarter fiscal 2012 ends on April 15, and we plan to announce results on May 16 after the market closed with our conference call to be held at 8:30 a.m. Pacific Time on May 17. And with that, I'll turn the call over to Linda.

Linda A. Lang

Thank you, Carol, and good morning, everyone. We believe our results for the first quarter reflects the success of our strategic initiatives and the related investments we've made over the last few years. The strong sales trends that we experienced during fiscal 2011 continued in the first quarter of 2012, with same-store sales at company Jack in the Box restaurants increasing 5.3%. The increase was driven by traffic growth of 2.8% combined with a 2.5% increase in average check. On a 2-year cumulative basis, first quarter sales were 500 basis points higher than the fourth quarter of 2011 and represented our sixth consecutive quarter of sequentially improving company same-store sales. The strength was broad-based with each of our major markets posting increases in sales, traffic and average check, and sales were positive across all day parts with breakfast remaining the strongest. Four weeks into the second quarter, we're continuing to see strong same-store sales growth. Quality improvements we're making to our core products continue to resonate with our guests. Our latest initiative in this area, which we introduced during the first quarter focuses on several enhancements to our classic burgers, which were supported with advertising, merchandising and social media. We believe the sustained improvements in our results have largely -- have been largely driven by investments to the company and our franchisees have made to the entire guest experience at Jack in the Box. This includes our restaurant reimaging program, which was substantially completed system-wide during the first quarter. Our continued focus on delivering a more consistent experience have resulted in improved speed of service. We believe reducing the variability and delivering faster service will build trust with our guests and drive additional business. This holistic approach has contributed to meaningful improvements in our overall satisfaction ratings, as measured by our Voice of the Guest surveys and brand loyalty study. The same-store sales increase in the first quarter, along with the benefits of our refranchising strategy, helps drive a 90 basis point increase in consolidated restaurant operating margin versus the year-ago quarter despite significant headwinds from commodity. Jerry will provide further comments on our margin expansion and other operating highlights during his remarks.

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