Jack in the Box Profit Drops 21%

The continuing burger wars and a soft economy helped push Jack in the Box Inc.’s fiscal first-quarter earnings down 21%, the company said Wednesday. Future interest expenses also prompted the San Diego-based chain to shave about 4 cents a share from its net income estimate for the year.

Earnings for the quarter ended Jan. 19 were $21.2 million, down from last year’s $26.7-million profit. The company attributed the decline largely to a 2.6% drop in same-store sales.

At 56 cents a share, earnings topped analyst estimates by 1 cent. The company posted earnings of 67 cents a share a year earlier. It reduced its forecast to 55 cents in December, citing the toll taken by competitors’ discounting.

Total revenue for the quarter grew 3.2% to $613.3 million, as the chain added 22 new company-owned stores.

Jack in the Box shares gained 38 cents to $15.75 on the New York Stock Exchange.

In an effort to boost traffic, market leaders McDonald’s Corp. and Burger King Corp. last fall began slicing the price of some of their signature sandwiches. But the move pounded profits, and McDonald’s franchisees voted Friday to pull the popular Big N’ Tasty hamburger from the discount Dollar Menu in some areas.

For the year, Jack in the Box expects a drop of 1% to 1.5% in same-store sales, and now anticipates earnings per share of $1.97 to $2.01, down from the previous estimate of $2.01 to $2.04.

“Jack in the Box continues to feel the impact of the aggressive discounting by the national chains,” said Robert J. Nugent, chairman and chief executive of the 1,880-store chain. “We refuse to engage in that short-term strategy to drive traffic.”

Dennis Milton, a restaurant analyst with New York-based Standard & Poor’s said investors may be “cautiously optimistic” about the company’s nationwide growth prospects and about the potential benefits of a “profit-improvement program” designed to reduce costs and increase efficiency.

“The stock is at a very depressed level right now,” Milton said. Shares are trading at about half of the company’s 52-week high, posted last May. “If they do start to improve, you could see a significant increase.”

For the second quarter, the company forecasts a same-store sales drop of as much as 2.7% from the year-earlier period, and a 13% drop in earnings, to about $16 million.

Most Jack in the Box company-owned stores are in California. To help reach the goal of becoming a national chain within five years, the company will break ground soon on a 70,000-square-foot research and development center adjacent to its headquarters.