What: Shares of Jack in the Box (JACK 3.16%) were down 15.9% as of 11:30 a.m. EST Thursday after the fast food chain reported disappointing fiscal first-quarter 2016 results.
So what: Quarterly revenue climbed roughly 0.5% to $470.8 million, driven by 1.4% same-store sales growth from the company's Jack in the Box system, and a 1.8% increase in same-store sales from Qdoba. Note Jack in the Box same-store sales growth lagged the broader QSR sandwich segment by 2.4 percentage points, according to NPD data for the quarter.
That translated to a 7.3% decline in net earnings to $33.2 million, and -- thanks in part to stock repurchases over the past year -- a 1.1% increase in net earnings per diluted share to $0.92. On an adjusted basis, Jack in the Box's operating earnings came in flat from the same year-ago period at $0.93 per share.
Analysts, on average, were anticipating higher adjusted earnings of $1.03 per share on revenue of $475.5 million.
Jack in the Box CEO Lenny Comma noted sales were lower than anticipated toward the end of the quarter "as several competitors began promoting aggressive value offers."
"We also experienced weakness at breakfast and lunch throughout the quarter, which we attribute primarily to our decision to shift the timing of some of our promotional activity around breakfast to the second quarter as compared to the first quarter of last year," Comma said. "In addition, we believe a competitor's messaging around its launch of all-day breakfast had some impact on our results, particularly in the 10:30 a.m. to noon period."
Now what: That's a not-so-subtle reference to McDonald's (MCD 2.46%) wildly successful expansion of its most popular day part, which also caused Dunkin Brands to report its first same-store sales decline since 2011 last week. And while Jack in the Box still managed to eek out a year-over-year gain for the metric during the quarter, it appears as though Jack in the Box won't be able to sustain that growth in the near-term despite recent core menu upgrades and plans to introduce new differentiated value offerings.
For the fiscal second quarter, Jack in the Box anticipates same-store sales ranging from down 3% to flat at Jack in the Box, and flat to up 3% at Qdoba. For the full fiscal year, however, the company is targeting same-store sales growth of 1% to 2% at Jack in the Box and 2% to 3% at Qdoba, as well as GAAP operating earnings per share of $3.50 to $3.63. Wall Street was looking earnings at the high end of that range.
In the end, it's hard to blame investors for taking a step back today as Jack in the Box came out on the wrong side of heightened competition for its core concept. Until Jack in the Box demonstrates tangible signs of sustained improvement in the coming quarters, I suspect its stock will remain under pressure.