Jack in the Box 1Q net earnings up

by Bryan Salvage
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SAN DIEGO – Jack in the Box Inc. announced net earnings for the first quarter ended Jan. 23 of $32.4 million, or $0.61 per diluted share, compared with net earnings of $24.2 million, or $0.43 per diluted share, for the first quarter of fiscal 2010.

Gains from refranchising contributed $0.34 per diluted share for the quarter as compared with approximately $0.11 per diluted share in the prior year quarter. Operating earnings per share were $0.27 per diluted share compared with $0.32 per diluted share in the prior year quarter.

“Jack in the Box company same-store sales increased 1.5% in the first quarter, driven primarily by transaction growth,” said Linda Lang, chairman, CEO and president. “California remained our strongest performing market. We believe the investments we have made around service consistency and making noticeable quality improvements to some of our core products are beginning to resonate with our guests. We remain focused on enhancing the entire guest experience, including the substantial completion of our restaurant re-imaging program system-wide, which is targeted by the end of 2011. We believe these actions will increase the customer appeal of the Jack in the Box brand and provide a catalyst for sales growth.

“Qdoba’s same-store sales momentum continued in the first quarter with an increase of 6.4% system-wide, driven largely by transaction growth as well as higher catering sales,” Lang said.

Consolidated restaurant operating margin was 12.6% of sales in the first quarter of 2011, compared with 14.3% of sales in the year-ago quarter.

Food and packaging costs were 80 basis points higher than prior year. Commodity costs were approximately 2.3% higher in the quarter, driven by higher costs for beef, cheese, pork, dairy and shortening. These increases were partially offset by lower costs for poultry, bakery and produce.

“Refranchising is a critical element in transforming the company to a business model that is less capital intensive and not as susceptible to cost fluctuations,” Lang said. “At the end of the first quarter, the Jack in the Box system was more than 60% franchised. We are ahead of our plan to achieve our goal to increase the percentage of franchise ownership in the Jack in the Box system to 70% to 80% by the end of fiscal year 2013.”

The company repurchased approximately 2,351,000 shares of its common stock in the first quarter of 2011 at an average price of $21.27 per share. In November 2010, the company’s board of directors authorized a $100 million stock-buyback program that expires in November 2011, of which $50 million remained available as of the end of the first quarter.

On Jan. 23, the company’s system total comprised 2,213 Jack in the Box restaurants, including 1,340 franchised locations, and 542 Qdoba restaurants, including 348 franchised locations.
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