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What to Look for With Jack in the Box's Earnings

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Will Jack in the Box (NASDAQ: JACK  ) pop out with strong same-store sales like Wendy's  (NASDAQ: WEN  ) did? Or will it pull a McDonald's (NYSE: MCD  ) or Burger King Worldwide (UNKNOWN: BKW.DL  ) and show more anemic or negative growth? Jack in the Box is scheduled to report its fiscal fourth-quarter results after hours on Nov. 20. Same-store sales numbers will help determine where this restaurant is headed.

Third-quarter results
In last quarter's earnings release, Jack in the Box reported adjusted earnings per share of $0.41 compared to $0.39. Systemwide same-store sales for its Jack in the Box and Qdoba locations saw gains of 0.1% and 1.3%, respectively.

The numbers aren't very exciting and are similar to the North American same-store sales results for McDonald's and Burger King. The two chains showed a 0.7% gain and a 0.3% decline, respectively, last quarter.

Jack in the Box guided for the fourth quarter to show "slightly positive" same-store sales for Jack in the Box and a 1% gain for Qdoba. Several wild cards could potentially lead to higher results that surprise the Street.

First, Jack in the Box introduced a "BBQ version of its Really Big Chicken Sandwich." The original version is a big seller for the restaurant chain.

Second, toward the end of the quarter Jack in the Box launched a new late-night menu. If this pulls in the crowds even a little bit, it could potentially tweak up the same-store sales a couple of percentage points, which could impress on a scale with Wendy's 3.2% rise. On the Jack in the Box conference call, CEO Linda Lang noted "Breakfast and late-night were again our strongest day-parts posting the largest year-over-year increases."

Finally, it's possible that Jack in the Box was being conservative with its guidance. COO Leonard Comma stated, "We have sequentially, week by week, seen our average unit volume grow throughout the month of July and into August." With more than half the quarter still remaining when this statement was made, momentum could potentially bring greater numbers to the upside.

New menu launches have helped Wendy's spike its same-store sales. Last quarter, Wendy's launched the Pretzel Bacon Cheeseburger and the October Pretzel Pub Chicken sandwich, which led its 3.2% growth in same-store sales. Wendy's further guided for "strong same-store sales in the fourth quarter." Though the economy is challenging, Wendy's shows that it's far from impossible for a fast-food chain to show good growth.

McDonald's, on the other hand, has gotten more anemic with its growth despite several new menu items. Its U.S. same-store sales only grew by 0.7% last quarter and then by only 0.2% in October. McDonald's blamed in part "ongoing competitive activity."

Burger King, likewise, has been struggling to show gains. It last reported a 0.3% decline in same-store sales in North America. However, it did launch its Satisfries in the last week of the quarter, which resulted in a spike in guest traffic. Once again this shows that the consumer is willing to spend a little more, but he or she must be enticed with something new. l

Foolish final thoughts
Pay attention not only to Jack in the Box's same-store sales, but specifically to how its new menu items are performing and especially its late-night menu. Jack in the Box stated in its conference call that it will give 2014 guidance with this upcoming earnings report. The same-store sales number in the guidance, combined with the numbers in the quarterly report, will give you a heads-up on how the restaurant concept itself is performing.

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Related Tickers

9/27/2016 4:00 PM
JACK $98.24 Down -3.46 -3.40%
Jack in the Box CAPS Rating: ***
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MCD $116.88 Up +0.35 +0.30%
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WEN $10.81 Up +0.01 +0.09%
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