Jack in the Box Trims Sales View
With hundreds of its former patrons now dining on MREs in the Persian Gulf, San Diego-based Jack in the Box Inc. is looking for a few good customers.
Troop deployments from military facilities in Southern California and elsewhere, poor weather in some markets and a sluggish economy overall prompted the nation’s fourth-largest burger chain to lower its same-store sales forecast for its fiscal second quarter, which ends April 13.
The company expects that sales at stores open for at least a year will fall 4%, rather than the 2.3% to 2.7% drop it previously anticipated.
About 10% of the chain’s nearly 1,900 restaurants are close to military facilities or border crossing points, spokesman Brian Luscomb said.
“In the markets near military bases, business is down, and that is a direct result of the war with Iraq and the troop deployment,” he said.
Jack in the Box began noticing a slowdown in traffic about three weeks ago, he said, as the ranks of its prime customers -- males 18 to 34 years old -- thinned out.
Southern California alone has sent about 70,000 Marines and Navy personnel to the Gulf -- where MREs, or meals ready to eat, are a staple -- including 50,000 from Camp Pendleton in San Diego County, according to Maj. Guillermo Canedo, a spokesman for the U.S. Pacific Command.
“If you look around and you see that tens of thousands of locals have been deployed and are no longer transacting business in your community, that’s got to have an impact on everybody,” Luscomb said.
As for Jack in the Box’s border outlets, they have suffered as auto travel has slipped on war worries, tighter security and gas price hikes, Luscomb said.
A number of U.S. companies have begun signaling that the war with Iraq will affect their quarterly results
Many in the San Diego area say they are seeing a correlation between troops going overseas and slowing sales.
Last month, Worldwide Restaurant Concepts Inc., the parent of the Sizzler steakhouse chain, said troop movements and other factors took a bite out of sales at its Pat & Oscar’s restaurants, which is heavily concentrated in the San Diego area.
The 37-store Islands Restaurants chain, based in Carlsbad, Calif., said sales growth has lagged in the area compared with elsewhere.
“Our sales are up across the board, but the sales increase in San Diego is not as great as the increases in Southern California” as a whole, spokesman Marcus Ginnaty said.
Charles Kaufman, a member of the board of the San Diego chapter of the California Restaurant Assn., said he expects the effect of the war to be topic No. 1 when the board meets today.
Jack in the Box’s revenue -- and share price -- began slipping long before Marines began shipping out, but the deployment represents one more challenge.
“Clearly, the trends were weak going into the quarter, even before the deployment,” said Mark Sheridan, a restaurant analyst with New Orleans-based Johnson Rice & Co. “The troop deployment was probably adding insult to injury.”
Jack in the Box reiterated its previous earnings target for the second quarter -- 44 cents a share -- and maintained its estimate for the year of $1.97 to $2.01 a share.
Its shares closed Wednesday 10 cents higher at $17.80 on the New York Stock Exchange. The stock has lost nearly half its value since May.
