Jack in the Box shares drop after 2Q disappoints

Shares of Jack in the Box Inc. dropped more than 10 percent on Wednesday, after the fast food chain's same-restaurant sales missed forecasts in the fiscal second quarter and the company lowered sales expectations for the third quarter.

The San Diego-based chain said second-quarter profit, which dipped 3 percent, was hurt by higher costs for cheese, dairy, eggs and shortening.

Jack in the Box shares dropped $2.90, or 10.4 percent, to $24.87. The stock has traded between $22.57 and $39.77 during the past 52 weeks.

Same-restaurant sales, or sales at locations open at least a year, is a key indicator of restaurant performance since it measures growth at existing locations rather than newly opened ones.

Jack in the Box attributed the sales decline to weakness in its California, Phoenix and Las Vegas markets, which have been hard hit by the housing downturn, high fuel prices and unemployment.

Cowen and Company Paul Westra, who maintained a "Neutral" rating on the stock, noted that other markets are reporting sales growth.

RBC Capital Markets analyst Larry Miller maintained an "Outperform" rating, noting that the company's earnings exceeded expectations despite the sales weakness and lower margins. He noted that the company lowered its same-store sales expectations for each brand.

For the third quarter, the company predicts a dip in same-store sales of about 2 percent at Jack in the Box restaurants and same-store sales at Qdoba locations to range from flat to 2 percent growth.

For fiscal 2008, the company anticipates flat same-store sales at Jack in the Box company restaurants and a 1 percent to 3 percent same-store sales increase at Qdoba restaurants.