San Diego-based hamburger chain Jack in the Box has posted net earnings for its Q3 ended 7 July up 15% to US$24.2m, compared with US$21m year on year.

Year-to-date, net earnings increased 8.9% to US$69.1m from US$63.4m last year, with earnings per share (EPS) at US$1.72 versus US$1.6 a year ago.

Company restaurant sales grew 5.2% to US$428m in the Q3 compared with last year. Year-to-date, they increased 7.4% to US$1.4bn compared with FY 2001. Total Q3 revenues increased 6.1% to US$461m, and systemwide sales were US$525m, a 4.8% increase. Year-to-date revenues have increased 8% to US$1.5bn, with year-to-date systemwide sales increasing 6.4% to US$1.7bn.

Sales at company restaurants open more than a year decreased 1.5% compared with a 4.3% increase in last year's Q3. Year-to-date, same-store sales fell 0.3% compared with a 4.2% increase in FY 2001.

Continued sales softness

"We experienced continued softness in our sales during the quarter due to significant competitive activity and to certain markets in the West where economic difficulties persist," said chairman and CEO Robert J. Nugent: "We are disappointed in our sales results; however, we are pleased to report increased growth in earnings."

"Our efforts to selectively increase the use of franchising, as well as benefits from our new Profit Improvement Programme, continue to help position Jack in the Box for improved, long-term operating results," he added.

Jack in the Box opened 23 new outlets during the Q3, one more than forecast, for a total of 1,493 Jack in the Box company restaurants versus 1,395 at the end of the Q3 2001. Total system restaurants at quarter end were 1,840 compared with 1,721 last year. It also converted five restaurants to franchises in the Q3.

The company's gross profit rate in the Q3 was 20% of revenues compared with a 19.9% forecast, due to continued profit-improvement initiatives in restaurant operations. Restaurant operating margin was 19.4% of sales versus 19.1% in the Q3 2001. Also, SG&A expense rate was 11.1% of revenues versus 11% forecast, primarily due to reduced leverage and to increases in insurance and legal costs.

Looking to the Q4

In the last two periods of the Q4, the company will introduce "Our Best Burgers Ever," an extensive quality-improvement programme featuring significant changes to the primary sandwich line, and using new packaging. Nugent said, "Our strategy is to distinguish ourselves among consumers by offering a standard of quality that differentiates Jack in the Box from other QSR competitors."

Jack in the Box will also offer three combo sizes, which Nugent says "is intended to offer more choices to our customers and deliver additional value to them", and introduce a new product while investing in additional product marketing, consumer research and R&D resources to increase its focus on new products and further enhancements to existing products.

"The quick-serve segment is rapidly evolving, and we intend to capitalise on our experience in offering a broad and varied menu to address the changing wants and needs of our customers," Nugent added.

Effective in the Q4, Jack in the Box will begin reporting its same-store sales quarterly instead of monthly.