Jack in the Box Earnings Up 9%, but Shares Fall on Profit Forecast

Strong sales of gourmet salads and sandwiches along with cost controls lifted Jack in the Box Inc.’s third-quarter earnings by 9%, beating Wall Street’s predictions. The company raised its 2004 profit forecast.

Nonetheless, Jack in the Box’s stock slid 9% on Wednesday after its fourth-quarter forecast fell below analysts’ expectations.

The San Diego-based operator and franchiser of 2,137 Jack in the Box and Qdoba Mexican Grill restaurants posted net income of $21.6 million, or 58 cents a share, compared with $19.8 million, or 54 cents, a year earlier, for the period ended July 4. Analysts had predicted earnings of 54 cents a share, according to Thomson First Call.

Total revenue rose 11% to $541 million. Sales at restaurants open at least a year increased 3.9%, which the company attributed in part to its premium salad lineup and Pannido deli-style sandwiches. Jack in the Box has been trying to update its menu offerings and move away from discounting.

“It’s the fourth consecutive quarter we’ve seen an increase in same-store sales,” President Linda Lang said in a conference call with analysts and investors

Jack in the Box also credited continued control of payroll and fixed costs and gains on the sale of company restaurants to franchisees for third-quarter results.

For the fourth quarter, the company forecast earnings of 49 cents a share. Analysts had expected 52 cents, according to Thomson First Call.

The company said it expected to open fewer Jack in the Box and Qdoba restaurants during the fiscal year than it previously predicted, citing construction delays.

“In our opinion, the stock is trading down because management beat third-quarter consensus expectations and then lowered expectations for the fourth quarter,” said Dean Haskell, an analyst with JMP Securities.

The company revised its 2004 profit guidance to $2.18 a share, excluding write-offs of 15 cents. Previously, it had forecast full-year earnings of $1.99.

Shares of Jack in the Box fell $2.84 to $28.41 on the New York Stock Exchange.