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Jack in the Box's (JACK) Stock Down Post Q4 Earnings Miss

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Jack in the Box Inc. (JACK - Free Report) reported fourth-quarter fiscal 2017 results, with earnings and revenues missing the Zacks Consensus Estimate.

Consequently, the company’s shares lost more than 5% in after-hours trading on Nov 29 owing to disappointing comparable-store sales (comps) at the Qdoba brand.

Meanwhile, Morgan Stanley & Co. LLC continues to assist the board in its assessment of possible alternatives with respect to the Qdoba brand coupled with other ways to boost shareholders’ value.

Notably, there is no assurance that the evaluation process will result in any transaction and the company has also not set a timeline for conclusion of the evaluation process.

Earnings and Revenue Discussion

Adjusted earnings per share of 73 cents lagged the Zacks Consensus Estimate of 89 cents by 18%. Further, the bottom line declined 24.3% year over year primarily due to lower revenues and restaurant operating margins.

Revenues of $338.7 million missed the Zacks Consensus Estimate of $342.5 million by 1.1%. Moreover, the top line fell 15% on a year-over-year basis owing to lower Jack in the Box and Qdoba brand sales.

 

Jack In The Box Inc. Price, Consensus and EPS Surprise

 

Jack In The Box Inc. Price, Consensus and EPS Surprise | Jack In The Box Inc. Quote

 

Behind the Headline Numbers

Comps at Jack in the Box company stores declined 2%, comparing unfavorably with the prior-year quarter fall of 0.5% and last quarter’s decline of 1.6%. Notably, a 5.4% decrease in transactions was partially offset by an average check growth of 3.4%.

Same-store sales at franchised stores declined 0.7%, comparing unfavorably with the gain of 2.4% in the year-ago quarter and the gain of 0.1% in the previous quarter. System same-store sales fell 1% against rise of 2% in the comparable period last year and prior-quarter comps decline of 0.2%.

Comps at company-owned Qdoba restaurants were down 4%, reflecting 6.4% decrease in transactions, partially offset by growth in average check and catering sales. This decline compared unfavorably with the prior-quarter decrease of 1.1% and the prior-year quarter rise of 1.2%.

Comps at franchised restaurants remained flat during the quarter, comparing unfavorably with the increase of 2.3% in the prior quarter and the year-ago comps growth of 0.4%. Also, system same-store sales were down 2.1% against a respective gain of 0.8% and 0.5% in the year-ago quarter and the last quarter.

The company’s consolidated restaurant operating margin was 15.8% of total sales, down 390 basis points (bps) year over year. Operating margin contracted 180 bps for the Jack in the Box company restaurants due to sales deleverage, elevated labor costs and higher repairs and maintenance costs, partially offset by a decrease in food and packaging costs and the benefit of refranchising activities in 2017.

Also, at the Qdoba restaurants, operating margin contracted 610 bps due to costs associated with new restaurant openings, an increase in food and packaging costs, impact of wage inflation and sales deleverage as well as commodity inflation.

SG&A expenses in the fiscal fourth quarter, as a percentage of revenues, were 10.6%. The figure was down 150 bps from the prior-year quarter. This reflects the impact of the company's restructuring activities, a $2.1-million decline in pension and postretirement benefits, reduced insurance costs as well as lower incentive compensation.

Fiscal 2017 Highlights

For fiscal 2017, the company posted operating earnings per share of $3.88 compared with $3.86 last year.

Total revenues were $1.55 billion as compared with $1.6 billion in fiscal 2016.

During fiscal 2017, the company repurchased approximately 3,220,000 shares at an average price of $101.59 for an aggregate cost of $327.2 million.

The company has decided to issue a fiscal 2018 guidance post the completion of the Qdoba evaluation process.

Currently, Jack in the Box has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Peer Releases

McDonald's Corp. (MCD - Free Report) reported third-quarteradjusted earnings per share of $1.76, beating the Zacks Consensus Estimate of $1.75 by 0.6%. The bottom line also increased 9% year over year.

Chipotle Mexican Grill, Inc.’s (CMG - Free Report) third-quarter 2017adjusted earnings of $1.33 per share fell short of the Zacks Consensus Estimate of $1.56.

In third-quarter 2017, The Wendy’s Company (WEN - Free Report) posted earnings of 9 cents per share that missed the Zacks Consensus Estimate of 12 cents by 25%. Moreover, the bottom line declined 18.2% year over year owing to lower revenues.

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