Jack In The Box Sales Show Some Progress

Jack in the Box Inc. JACK reported better-than-expected 2QF16 adjusted EPS of $0.85, driven by stronger restaurant margins, higher franchise profit and lower G&A. BTIG’s Peter Saleh maintained a Buy rating for the company, with a price target of $79.

Jack in the Box’s shares are likely to rally a little, in response to the company’s better-than-expected performance, analyst Peter Saleh commented.

Sales Trends Improved During The Quarter

While Jack in the Box’s sales continue to be under pressure, the trends improved over time from the more challenging trends witnessed at the beginning of the quarter, “Furthermore, we believe management’s reiteration of full year guidance will give investors comfort that the initiatives at both brands are driving results,” Saleh wrote.

Jack in the Box’s comparable sales were higher than the BTIG estimate of 0.4 percent, given the improved levels at both the company-owned and franchised stores. The company reported comparable sales of -1 percent and 0.3 percent, respectively, for own and franchised stores.

The company’s system-wide comps underperformed the QSR sandwich category by 270 bps, worse than the 240 bps gap witnessed in 1QF16. Comparable sales at Qdoba increased 2.1 percent system-wide, with the stronger results at company-owned restaurants boosted by transactions and catering growth.

Higher labor and occupancy costs restricted the company’s restaurant-level margins, which contracted to 19.9 percent, Saleh added.