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Jack in the Box's Profit Declines 18%

Burger chain points to higher costs for food and insurance. Still, results beat analysts' forecasts.

August 07, 2003|Karen Robinson-Jacobs | Times Staff Writer

Jack in the Box Inc. said Wednesday that its third-quarter profit fell by 18% in part because of higher food and insurance costs.

Net income for the San Diego-based burger chain, the nation's fourth-largest, fell to $19.8 million, or 54 cents a share, in the quarter ended July 6, compared with a profit of $24.2 million, or 60 cents a share, a year ago. The latest quarterly profit beat by 5 cents a share the consensus estimate of analysts surveyed by Thompson First Call.

The firm's third-quarter revenue rose by 6% to $488.6 million.

Continued economic weakness and increased costs for workers' compensation insurance, food and packaging hurt the company's bottom line, said Robert J. Nugent, chairman and chief executive.

But the company, which has more than 1,900 restaurants, won a tax dispute that lowered its combined state and federal tax rate for the quarter to 32.5%, compared with the 38% forecast.

Because of the tax break, the company boosted its earnings guidance for the year to $2.03 to $2.06 a share. In May, Jack in the Box estimated that it would earn $1.97 to $2.01 a share.

The tax rate should return to 38% for fiscal year 2004, the company said.

Sales at stores open at least a year, a key measure of chain health, fell by 0.2% in the third quarter, better than the 2.5% drop forecast by the company and a gain from the 1.5% drop a year ago.

The flat sales were another indication that the burger slump, which hit chains hard last year and earlier this year, may be easing.

Last month McDonald's Corp. announced a 4.9% gain in same-store sales for its second quarter, the first quarterly uptick since 2001.

For the fourth quarter, Jack in the Box expects a 1% increase in same-store sales, up from a 2.7% drop last year.

Also on the plus side, the company's three new premium salads, launched in April and selling for about $4.70, helped draw new customers.

"We are encouraged by this first indication that our salad program is working," said Linda A. Lang, executive vice president for marketing and operations. "Consumers are looking for higher-quality food and are willing to pay for it."

Jack in the Box's shares rose 32 cents to close at $20.59 on the New York Stock Exchange. The stock has climbed 19% this year.

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