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Jack in the Box Q2 earnings 29 million

Staff writer ▼ | May 12, 2016
Jack in the Box reported earnings from continuing operations of $29 million, or $0.85 per diluted share, for the second quarter ended April 10, 2016.
Jack in the Box
Jack in the Box   System same-store sales were flat
This compares with $23.4 million, or $0.61 per diluted share, for the second quarter of fiscal 2015.

Jack in the Box system same-store sales were flat for the quarter, and lagged the QSR sandwich segment by 2.7 percentage points for the comparable period, according to The NPD Group’s SalesTrack® Weekly for the 12-week time period ended April 10, 2016.

Included in this segment are 16 of the top QSR sandwich and burger chains in the country. Company same-store sales decreased 1.0 percent, with average check up 1.4 percent.

Qdoba same-store sales increased 2.1 percent system-wide and 3.1 percent for company restaurants in the second quarter. Company same-store sales reflected a 3.7 percent increase in transactions as well as growth in catering sales.

Consolidated restaurant operating margin decreased by 70 basis points to 19.9 percent of sales in the second quarter of 2016, compared with 20.6 percent of sales in the year-ago quarter.

Restaurant operating margin for Jack in the Box company restaurants decreased 70 basis points to 20.7 percent of sales. The decrease was due primarily to minimum wage increases in California that went into effect in January 2016 and higher costs related to equipment upgrades which were partially offset by favorable food and packaging costs.

The decrease in food and packaging costs as a percentage of sales resulted from the benefit of commodity deflation of approximately 2.9 percent in the quarter, favorable product mix changes and menu price increases.

Restaurant operating margin for Qdoba company restaurants decreased 50 basis points to 18.3 percent of sales, as costs associated with a greater number of new restaurant openings and higher promotional activity more than offset the sales growth and benefits from commodity deflation of approximately 4.6 percent in the quarter.

Franchise margin as a percentage of total franchise revenues improved to 53.8 percent in the second quarter from 51.7 percent in the prior year quarter.

The improvement was due primarily to higher net rental income of $1.9 million recognized in the quarter related to previously refranchised Jack in the Box markets. This annual adjustment resulted from higher sales over the last year.

SG&A expense for the second quarter decreased by $5.6 million and was 13.0 percent of revenues as compared to 14.7 percent in the prior year quarter.

The decrease reflects a $3.9 million decrease in incentive compensation and a $1.2 million decrease in pension and postretirement benefits related to the sunsetting of the company's qualified pension plan on December 31, 2015.

Mark-to-market adjustments on investments supporting the company’s non-qualified retirement plans positively impacted SG&A by $2.3 million in the second quarter of 2016 as compared to a positive impact of $1.6 million in the second quarter of 2015, resulting in a year-over-year decrease in SG&A of $0.7 million.

These decreases were partially offset by a $2.0 million increase in advertising costs at Qdoba due to the timing of promotional activities, and higher pre-opening costs of $0.6 million resulting from a greater number of Qdoba openings and restaurants under construction in the second quarter.

Interest expense, net, increased by $2.7 million in the second quarter due to increased leverage and a higher effective interest rate for 2016.

The tax rate for the second quarter of 2016 was 36.7 percent versus 37.9 percent for the second quarter of 2015. The lower tax rate in the second quarter of 2016 was due primarily to favorable adjustments on investments supporting the company's non-qualified retirement plans.