Jack in the Box (JACK) posted its fiscal second-quarter earnings after the market closed on May 16. Its adjusted EPS (earnings per share) came in at $0.80 on revenues of $209.8 million. Analysts were expecting adjusted EPS of $0.85 on revenues of $211.4 million.
Its SSSG (same-store sales growth) declined 0.1% during the quarter against analysts’ estimate of positive 0.1%. The lower-than-expected SSSG, revenue, and EPS led to a fall in the stock. Jack in the Box was trading 3% lower in after-market hours on May 16.
Year-over-year, Jack in the Box’s revenue declined 21.1% due to the refranchising of company-owned restaurants. There were 188 company-owned restaurants compared to 371 in the corresponding quarter of the previous year. However, some of the declines were offset by SSSG of 0.9% in company-owned restaurants and an increase of franchised restaurants by 168 units. The company refranchised 63 restaurants in the second quarter.
During the quarter, Jack in the Box’s EPS declined 7% to $0.80 from $0.86 in the corresponding quarter of the previous year. The decline in revenue and operating margin offset the positive effects of a lower effective tax rate and share repurchases to post a decline in EPS.
The company’s operating margin declined from 22.5% to 22.3% due to a contraction in its franchise margin, higher SG&A (selling, general, and administrative) expenses, and higher D&A (depreciation and amortization) expenses. Those were partially offset by a higher operating margin for its company-owned restaurants. During the quarter, the company repurchased 1.1 million shares for approximately $100 million and had approximately $281 million available under its share repurchase program.
For fiscal 2018, Jack in the Box’s management has set its SSSG guidance at flat to 1%. It also expects to open 25 new restaurants during this fiscal year.