How Will Jack in the Box’s Qdoba Perform in 1Q16?



1Q16 estimates and guidance

On the back of 14% same-store sales growth in 1Q15, analysts are expecting the systemwide same-store sales to be at 1.5%. The Qdoba Mexican Eats management has set 1Q16 guidance for company-operated restaurants at 0% to 2% while the analysts expect it to be around 1.3%.

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Sources of same-store sales growth

The company management is focused on new products, enhanced communication, and a digital-platform-based loyalty program to drive its same-store sales growth. In late October, the brand had introduced Knockout Tacos, featuring six different chef-inspired recipes, which is one of the several innovations to be introduced in fiscal 2016.

Catering sales, which have registered double-digit growth in the last seven quarters, are also expected to drive same-store sales growth in 1Q16. Also, the recent E. coli fiasco surrounding Chipotle Mexican Grill (CMG) could help Qdoba in increasing its traffic, as Chipotle’s customers may be looking for an alternative with similar menu offerings. You can read about E. coli’s effect on Chipotle’s 4Q15 earnings at Chipotle’s 4Q15 Earnings Take a Hit: Blame It on the Food.

Advertising and promotions

The company management has stated that in 2016, it will be using television to showcase its Knockout Tacos in six different markets as part of its “Choose Flavor” marketing campaign. The company also stated that it will test its new digital-platform-based loyalty program in 2Q16.

In the recently concluded quarter, Qdoba’s peers Chipotle Mexican Grill (CMG) and Chili’s, which operate under the umbrella of Brinker International (EAT), recorded negative same-store sales growth. On the other hand, Panera Bread (PNRA) recorded positive same-store sales growth of 3.6% for company-operated restaurants and 1.1% for franchise-operated restaurants. You can also gain exposure to JACK by investing in the iShares U.S. Consumer Services ETF (IYC), which invests 0.1% of its portfolio in JACK.


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