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Jack in the Box Profit Falls 32.3%

November 14, 2002|Karen Robinson-Jacobs | Times Staff Writer

Heavy discounting by its competitors and previously announced one-time charges helped take a bite out of fiscal fourth-quarter earnings at San Diego-based Jack in the Box Inc., which reported a 32.3% drop in net income Wednesday.

The nation's fourth-largest burger chain reported earnings of $14 million for the quarter ended Sept. 29, down from $20.7 million in the year-ago period. Earnings per share were 35 cents, down from 52 cents in the year-ago period.

Revenue increased by 4.7% to $463.3 million.

For the full fiscal year, earnings were essentially flat: $83 million compared with $82.2 million a year ago. Revenue for the year grew by 7.2% to $1.97 billion.

Jack in the Box shares lost 33 cents to close at $20 in trading on the New York Stock Exchange.

Analysts noted that the weak economy has prompted many cash-strapped consumers to look for bargains or stay home, while burger-heavy chains such as Jack in the Box are losing ground to so-called quick-casual fare restaurants offering healthier, fresher and higher-priced alternatives.

"From the quick-serve restaurant perspective, it's been a much more competitive environment," said David L. Rose of JMP Securities.

Jack in the Box cited "continuing declines in consumer confidence, expectations for ongoing economic challenges and related softness in sales" in dropping its earnings estimate for fiscal 2003 to $91 million from the $98.6 million previously forecast.

Sales at company restaurants open more than a year fell by 2.7% in the fourth quarter, contrasted with last year's 3.8% rise, the company said. For the year, same-store sales dipped by 0.8%, contrasted with a 4.1% increase in fiscal 2001.

"It has been and continues to be a challenging environment," said Chief Executive Robert J. Nugent, who lamented the "extremely high levels of discounting by the national chains."

In the fall, McDonald's Corp., the nation's No. 1 burger chain, sought to lure new customers with aggressive nationwide marketing of a "value menu" featuring items discounted to $1. The move forced Burger King to follow suit.

To help boost sales, Jack in the Box plans to launch two new higher-end sandwiches in January, and to expand its own "value menu" of lower-priced items next month.

In addition, the firm plans to step up its franchising efforts. Currently, the company owns about 80% of the stores. Over the next five years, Jack in the Box hopes to have 65% of its stores company-owned and 35% franchised.

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