Jack in the Box customer traffic at company stores declined by 2.4% in its Q2, ended April 15, 2016, but the company doesn’t believe that changes in core menu items it made at the beginning of the year was responsible. That initiative—highlighted by a change in burger buns—has been well received by consumers, Chairman-CEO Len Comma told analysts today.
So why did Jack corporate stores report a 1% decline in same-store sales (compared with a 7.4% increase a year earlier)? It wasn’t McDonald’s All Day Breakfast. Comma said Jack’s breakfast daypart was 23% of sales, its highest share ever. The traffic slowdown came after breakfast, from 10:30 a.m. to noon.
Bad weather, especially in Houston (where 17% of its system is located), hurt. But so did discounting by rivals. Comma said Jack will be more aggressive about discounting, a vow the also made after its Q1. The chain featured bundled-meal deals involving its croissants, Chipotle Chicken Club and the Jumbo Jack burger it introduced earlier this year. It also added a Triple Cheese & Hash Brown Breakfast Burrito during the quarter.
“We’re trying to walk the fine line between profitability and sales,” Comma told analysts. He said Jack intends to maintain the gains it has made at the premium end of the price spectrum “without letting the value side of the menu completely erode.”
Comma said premium items Jack releases will have “new news” for consumers and not be me-too products. Its next premium LTO may well be the Habanero Pepper Jack Ultimate Cheeseburger that it tested in San Diego and Houston in March, as reported here exclusively.
Despite the stagnant customer traffic (outweighing a 1.4% increase in average check), Jack in the Box shares traded higher because the company reported strong earnings per share of 85¢, well above the expected 70¢ per share.