What ails Jack in the Box?
The nation's fifth largest burger chain has upgraded its food, remodeled its stores and trained its employees in the fine art of customer service.
Jack in the Box isn't springing back from downturn
The nation's No. 5 burger chain has upgraded its restaurants and menu, but sales have not rebounded from before the recession and its stock growth lags behind other fast-food firms.
Jack in the Box Inc. reported last week that second-quarter earnings fell… (Gary Friedman, Los Angeles Times)
But even though consumers forked over $3 billion for sandwiches, tacos, churros and other food last year, sales are still way below pre-recession levels. Jack in the Box Inc.'s stock remains sluggish and last week the company said its profit in the three months ended April 17 dropped 62% from the same period last year.
Customers are starting to return to its stores, but it's a trickle, with same-store sales up 0.8% over the second quarter of 2010.
"They need to find a way to differentiate themselves," said Darren Tristano, restaurant analyst for the research firm Technomic Inc. "If you think of Jack in the Box, I'm not sure what you think of anymore."
Jack in the Box is caught in the same fix as many other venerable fast-food brands: Their key customers — working class men in their 20s — are still hugely affected by unemployment. And an onslaught of competition from high-quality new chains like Chipotle Mexican Grill Inc. has put a particular squeeze on older restaurants that let their menus and their stores become tired.
Shares of Chipotle are up 36.8% this year, as of Thursday.
But even other vintage brands were doing better than Jack in the Box, whose share price has risen 3.9%.
Yum Brands Inc. — which owns Taco Bell, Pizza Hut and KFC — is up 14.3% so far this year on the strength of its large global presence. And AFC Enterprises Inc., which owns Popeye's Chicken, is up 12.2%, partly because the price of poultry has, unlike beef and cheese, remained somewhat stable.
Jack in the Box's chief nemesis, McDonald's Corp., had a major push to renovate its stores in recent years, and its marketing — such as the campaign for the limited-time-only McRib sandwich — has helped keep the chain in the limelight. It's shares were up 7.4%.
Jack in the Box's problems are exacerbated by its heavy presence in California, where unemployment remains stubbornly high, said Chris O'Cull, restaurant analyst for SunTrust Robinson Humphrey in Atlanta. Store upgrades and menu changes have not yet significantly affected the company's results, he said.
FEATURED
MORE:
Advertisement
