Jack in the Box FY 1Q15 Earnings Call Notes

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Each week I read dozens of transcripts from earnings calls and presentations as part of my investment process. Below are some of the most important quotes about the economy and industry trends from the transcripts that I read this week. Full notes can be found here.

Jack deemphasized, food emphasized in ads

“By the way if you saw any of the Buttery Jack ad that debuted on Super Bowl Sunday you might have noticed a greater emphasis on food, while Jack will remain a prominent part of our advertising expect the food to have more of a starring role in our campaigns going forward.”

Retraining everyone on hospitality

“we’re addressing some of the critical guest feedback we heard while conducting brand research last year. In a nutshell they said we just weren’t friendly enough, so we kicked off the year by launching an effort to retrain our entire work force on hospitality.”

3% inflation expected

“As far as commodities are concerned, overall, we continue to expect commodity cost for the full year to increase by approximately 3% with higher inflation in the first half of the year as we roll over deflationary periods in the prior year. We currently anticipate inflation in the second quarter of approximately 4% to 5% at Jack in the Box and 2% to 3% Qdoba driven by substantially higher beef cost.”

Customer told us we weren’t doing a good enough job with burgers, so we’re adjusting the menu

“Joe I spoke about at ICR that we were going to really focus on the lunch and dinner dayparts primarily trying to grow some equities in the burger business and a lot of that thinking came from the research that we did last year where the consumer essentially told us you’re not doing a great enough job with burgers.”

We think the things we’re doing are helping more than gas prices

I won’t talk about the economic drivers only because it’s not impacting us the way the way it’s impacting others, we’re actually doing better than the industry. So it’s hard for us to say — its one thing or the other we we’re tracking with everyone else I might say it’s gas prices or other things. But I think it’s the things we’re doing in addition to that. But you alluded to something that we have experienced sort of changes with it’s too soon to tell whether the consumer is responding to that but at least there some evidence and our hypothesis would say maybe it’s helping.”

We’re emphasizing the food

“the products may not be as neatly put together but the emphasis on things like the juiciness of the patty or the texture of the burn or the freshness of the tomato and those things are coming across loud and clear and actually when you look at the amount of space on the television screen or on the POP that we give to the food it’s much larger percentage of the space. We’re getting close ups. So you can check out the commercials on our Web site and you can sort compare and contrast for yourself. But that is certainly one change that was put in place.”

We’re as amazed with this performance as you are

“I just have to be honest we’re just as astonished by the performance as you are. These are subtle changes and very few changes compared to what we intend to do that are already driving pretty big time results. And honestly they’re so hot off the press is that we even had an opportunity to dig deep enough into the drivers to fully understand why the guests are responding so favorably.”

When we dug into what customers are saying

“when we dug into some of the more qualitative side of that what we found was the consumers have their sort of fan favorite on our menu, things like the Sourdough Jack. But what they don’t say about our burgers is that we holistically love your entire line of burgers and we holistically believe that you’re selling us quality products. What they say is we like this one product, so we’re getting the benefits associated with that and what we were not getting is the halo associated with the belief system that Jack in the Box’s entire menu and particularly their entire line of burgers are craveable.”

Not being overly aggressive on growth projections

“I think to use your words it is a prudent approach which is very typical of Jack in the Box and I said earlier this is sort of uncharted territory for us with this second quarter performance and the Buttery Jack performance. So we don’t want to bank an entire year on three weeks where the performance and that’s why we’re taking a look at the two year trends into Q2 here and trying to be reasonable. And then we’re not forecasting out beyond Q2, this type of rate of growth. So it is just a prudent approach”

We’re going to remain in a show-me state

“But we’re going to remain in a show-me state, it’s just who we’ve been historically and it’s really nothing other than that.”

Not seeing an uptick in turnover of employees

“we’re not seeing an uptick in turn over, we have been reading some of the articles out there that are pointing towards this competition for talent and that there’s this war being waste for talent across competitor brands. We’re not seeing that, we’re not seeing it in our turnover numbers and we’re just not experiencing that behaviorally in the restaurants. “