Jack in the Box 2Q17 Earnings Call Notes

Lenny Comma – Chairman and Chief Executive Officer

We are beginning to see some inflation

“after several quarters of lower commodity costs, we are beginning to see some inflation. We anticipate this will curtail some of the hypercompetitive discounting we have seen in recent quarters.”

Incremental lift from DoorDash partnership

“We have seen incremental lift in sales and markets served by DoorDash, which is delivering Jack in the Box food from approximately 37% of our system. We are also negotiating with other providers to expand delivery and have already begun tests with some of these vendors.”

Seeing worse performance at lower price points

“Yes. So if you look at the traffic below the $5 price point is negative. And when you look at the traffic above the $5 price point it’s essentially flat. So yes, we are seeing a much healthier business above the $5 price point and it becomes very obvious to that all the pressure is on the bottom side of the menu. In addition to that we also see the brands with positive same-store sales are starting to see margin pressures.”

The consumer is redefining convenience and we are in the convenience business

“The consumer is really redefining convenience and we are in the convenience business. So we are going to need to do some things to respond to that which we have already either done or at least begun to test. The consumer is also demanding lower price points in the current – in the current environment. So we need to do some things to respond to that. And then long-term, we just think that our brand is going to lose its relevance, if we don’t remodel our sites and improve our service that leads to this place where it’s sort of frictionless, which is again becoming sort of one of the redefinitions of service going forward. So I think, we need to actually invest in all of those things, not just value.”

Jack in the Box 2Q16 Earnings Call Notes

Jack in the Box (JACK) Leonard A. Comma on Q2 2016 Results

Not seeing economic weakness in Texas, seeing weather weakness though

“I think the rains are probably the biggest current driver. We’ve been paying close attention to this and we do see that California is outperforming Texas, but what we’re not seeing yet is any confirmation that Texas has a major economic slowdown. So, we’re looking really at the most recent weather impact as the bigger contributor.”

We’re going to be involved in digital and it we may do it ourselves

“when you look at the list of potentially all things digital in delivery, we understand that in order for us to be competitive going forward, we will have to play in that space. What we’ve been able to evaluate and get some information on is really this understanding of how much of that business is being led by the aggregators that are out there or the third-party folks that do digital for major organizations and how much of that is being done internally. And what we see is, there is going to be a pretty decent contest with the aggregators versus the internal investment. Either way what you’re going to see is every major brand including us will play in that space, whether we do it all ourselves or partially ourselves, we’ll be involved in everything from delivery to apps and digital applications that allow us to manage everything from CRM programs to mobile payment.”

Going to stay outside of TV advertising for Qdoba

“Yeah. So, we tested TV alongside several other things and what we actually found is that some of the other things we were doing outside of television actually drove better results. So although TV was a great way for us to bring attention to the brand and some of the innovation that was happening. We didn’t feel like after the test it was the best go-forward strategy. So, we’re going to use other media type platforms, online and also promotional activities intended to put offers in front of the consumers’ face very directly and we’ll use those types of things to bring that messaging alive and essentially get food in people’s mouth, that strategy seems to be playing well for us. So, we’re going to stay more on that side of the things versus television.”

Not clear we’re seeing a softening outside of regional weather impacts, but it is clear that we’re seeing aggressive competition in a deflationary competitive environment

” I don’t know that it’s completely clear that there is a softening that’s happening outside of a regional impact, we’re going to keep a close eye on it. But at the end of the day, the pieces that are very clear is that the industry continues in a deflationary commodities environment to be aggressive.”

Impact of McDonalds all day breakfast has begun to wane

” it has begun to moderate, we can see that quarter-to-quarter. Additionally, we had mentioned back when we reported first quarter results that the breakfast items that were being sold outside of that 10:30 to noon timeframe had taken a hit, which we thought was largely due to the rollover from prior year’s promotions for Jack in the Box. And it was certainly compounded though by the aggressive marketing of the breakfast all day promotion from one of our major competitors. But as we move here into Q2 and Q3, we do see that the 10:30 to noon timeframe, which is the timeframe we set was most impacted has waned. And we also see that the impact outside of that timeframe has been negated.”

Miscellaneous Earnings Call Notes 2.18.16

Hormel Foods’ (HRL) CEO Jeff Ettinger on Q1 2016 Results

Jeff Ettinger

One of our secrets is being located in a small town in Minnesota

“One last aspect of the secret behind Hormel Foods that I’d like to share with you really relates to our team, where we are — I mentioned to you we’re in a small town in Minnesota; we’re little bit of a throwback in that regard. When someone joins our organization, they tend to join it for a life and indeed our average tenure of our officer team at Hormel Foods is 26 years, that’s not 26 years of industry experience, that’s 26 years of experience at Hormel, which I think does make it somewhat unique in the industry.”

Southern Copper’s (SCCO) Q4 2015 Results

Raul Jacob — CFO

China consumers 46% of the world’s copper

“As you know, China is the world’s major copper consumer with about 46% of world consumption. We believe China’s demand for copper will increase about 3.5% in 2016 driven by the partial recovery of the Chinese housing market and the national grid investment program.”

Current prices not high enough to support supply growth

” current copper prices are not sufficient to promote the necessary supply growth to meet future market needs. Thus, we believe current market circumstances are improving the strong long-term fundamentals of our industry.”

Community Health Systems (CYH) Wayne T. Smith

Volumes lower because of lower flu

“Our volumes, including emergency room visits, were lower than expected in the quarter as compared to a year ago, mainly attributable to the lack of flu and respiratory illness which we historically see during this period. On a same-store basis, if you factor out the flu-related volume decline, we would have had reported slightly positive growth in adjusted admissions.”

Unable to complete proposed spinoff because of debt markets

“The decision to delay the spin, as we have previously stated, is the sudden disruption in the debt markets. This is a market-driven decision. We understand that the debt markets have not been like this since 2008. We expect to complete the spin once market conditions are favorable.”

Potbelly (PBPB) Q4 2015 Results Michael W. Coyne – Chief Financial Officer & Senior Vice President

Wages generate inflationary headwinds

“Similar to last year, we are expecting inflationary headwinds in 2016, primarily as it relates to our labor costs, which we expect to be more impactful this year due to the continuing impact of minimum wage increases that were taken in 2015, as well as expected wage increases this year.”

Freddie Mac’s (FMCC) CEO Don Layton on Q4 2015 Results

The concept of capital in our conservatorship is very unusual

“I’d also wish to remind everyone that the concept of capital, equity primarily, in our conservatorship is very unusual. The many firms and industries which deal with us, look not to our small permitted capital buffer but to the unused portion of the purchase agreement as the source of the capital stream behind our liabilities and thus us appropriately as a very strong credit. That unused PSPA amount has been a very large number for some time specifically $140.5 billion.””

The Priceline Group (PCLN) Daniel J. Finnegan – Chief Financial Officer

Global airfares were down by 15% over the last several months

“In addition, global airfares were down by about 15% over the last several months, according to KAYAK flight search data, which significantly impacts Priceline.com’s gross bookings growth but has no impact on gross profit growth.”

Jack in the Box (JACK) Leonard A. Comma on Q1 2016 Results

Hurt by stressing quality over value and also felt competitive effects from MCD

“the major takeaway is that we chose to focus on this effort and not to promote value deals to the same degree as quarter one last year. Although we stand behind our decision to invest in long-term quality improvements, we paid the price in the quarter as we struggled to roll over last year’s two for $3.50 breakfast croissant promotion. Additionally, we experienced the effects of both the heightened competitive focus on value and the impact of McDonald’s all-day breakfast, primarily between the hours of 10:30 a.m. to noon.”

PG&E (PCG) Anthony F. Earley Jr. on Q4 2015 Results

60% of energy was carbon free

” In 2015, nearly 30% of PG&E’s electric deliveries came from qualifying renewable resources, and even more meaningfully nearly 60% of the energy that we delivered was carbon free.”

CPUC authorizing ROE of 10%

“you’ll see that we continue to assume a CPUC authorized equity ratio of 52%, and a return on equity of 10.4%, which we now have certainty on through 2017.”

Jack in the Box FY 4Q15 Earnings Call Notes

Jack in the Box’s (JACK) CEO Lenny Comma on Q4 2015 Results
Lenny Comma – Chairman and Chief Executive Officer

Minimum wage costs will affect margins by 50-75 bps

“We are currently estimating the impact of higher minimum wages including the increase in California’s minimum wage to $10 and our beginning January first to be about 75 basis point on the Jack in the Box brand for the full year or roughly 50 basis points on a consolidated basis”

A lot of discounting in the industry and all day breakfast at MCD is impacting

“let me first make a broad statement, I think, what we see in the industry is a significant amount discounting going on and we think that as having the largest overall impact on the industry. Then when we narrow it down to one of our major competitors doing the breakfast all day, certainly it’s going to impact everybody in the industry.”

” as we talk to our franchisees about the impact, essentially there is not a big level of concern out there about McDonald’s competing with us in this way.”

You don’t want consumers to remember a punch line but not a product

“the tone of the Jack in the Box advertising is changing and it’s the way to think about it is we spend a lot of time in our ads kind of having this punch line and the big joke and that brought a lot of attention to the brand, but if sometimes outweighed the focus on the product and it didn’t necessarily get the consumer – focused on and what it was we’re offering. Certainly, we don’t want to be in a position where at the end of an ad, they can remember the joke, but they can’t remember the product.”

Let customer reaction tell us where to go

“we’re going to see the consumers’ reaction of what we’re doing and that will tell us what the next steps are.”

Jack in the Box 1Q15 Earnings Call Notes

Research driven company

Our research told us the guest wanted more choices when it comes to beverages. So we announced in March that we will be rolling out Coke Freestyle machines across the Jack in the Box system by the end of the calendar year.

Weather was more of a factor this yearAverage weekly sales at $36k

Average weekly sales for Jack in the Box company restaurants topped $36,000 in the quarter, up 11% resulting from both refranchising and strong same-store sales growth. Year-to-date our company AUVs are above $1.8 million

owning up to being disappointed about results of consumer satisfaction surveys

January I guess it was, we talked about the research that we have been conducting with the Jack in the Box brand and that we were disappointing in some of the results that we got, essentially with the consumer set was that they were not pleased with state of our hamburgers and several other core products.

Seeing consumers respond exactly as the research said they shouldincentive comp plans affecting margins

you look at our incentive compensation plans, they are driven almost exclusive on improvement in operating EPS and an improvement in restaurant level margins. And so what we’ve seen is as we have continued to perform better than our original expectations, we’ve also seen an increase in our incentive comp accruals so far for the first half of the year and then also we expect to see going forward for the balance of the year which is included now in the guidance. So I think that’s partially offsetting that.

It takes 18 months to two years to develop a new location

Lenny’s point is we’re seeing a significant increase in the interest from our franchise operators to building new Jack in the Box restaurants. But because there is a drive through and it’s a free standing ground up building, that process takes anywhere from call it, 18 months in Texas to two plus years in California. So activity today doesn’t create a new restaurant next month because it has a much longer timeline

Seeing egg prices trend higher because of avian flu

Yes. We are seeing generally egg prices trending up and fortunately for us most of our supplies are coming from yet unaffected areas. By and large, it does mean that we are completely unaffected, but I think our major supplies are coming from those other yet not affected areas. Eggs are only about 3% of our overall spend and our assumption about increasing egg costs are included in our 2% commodity guidance for the full-year.

Jack in the Box FY 1Q15 Earnings Call Notes

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. “

Jack in the Box FY 2Q13 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

“Same-store sales increased 0.9% at company Jack in the Box restaurants”

“Qdoba, same-store sales at company restaurants were down 2%”

“we now expect commodity costs for the full year to increase by approximately 2% to 2.5% compared with our prior guidance of 2% to 3%, primarily due to lower expected inflation for beef and chicken.”

“As for chicken, we have contracted our price through the end of calendar year 2013, and are now expecting poultry prices to be 2% higher versus our prior forecast of 6% inflation.”

“we don’t typically speak about weather, but we certainly saw the difference based on the footprint this time around.”

“[new ceo] clearly has a sense of urgency around the need to improve the performance at Qdoba”

Jack in The Box Conference Notes 3.13.13

This post is part of a series of posts called “Company Notes.”  These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings.  The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call.  Other posts in this series can be found by clicking here.  Full transcripts can be found at Seeking Alpha.

“On average, it only cost about $700,000 to build a Qdoba restaurant. So clearly a much lower investment of capital than it is to build a Jack in the Box restaurant, so it, I think, explains our strategy of why are we devoting more capital for the Qdoba side. And the other point I’ll mention is at $1 million AUV, Qdoba still has very nice cash flow margins in that 18% kind of range. As they accelerate, the stores that can get into $1.3 million, $1.4 million, those EBITDA margins accelerate into the mid ’20s pretty dramatically, again, because of the fixed cost structure.”

“I think Taco Bell has done a great job with their new Doritos Locos Tacos. It’s a great new product for them and it’s obviously driving sales. Jack in the Box is going to respond with our own innovation that’s going to drive our loyal guests back into our restaurants more often. But we’re not going to necessarily try to copycat what they’re doing with their tacos, and especially because tacos for us is our #1 selling item. We sell more units of tacos than any other item on the menu. And even with the Doritos Locos Tacos launch, we haven’t lost any of our sales in our tacos. So we wouldn’t want to mirror exactly what they’re doing, but we’d want to respond in a way that’s just going to drive traffic sort of Jack’s way.”

[Advertising] “So let’s talk a little bit about the relationship we have with Secret Weapon. They’re a very unique firm out of Santa Monica, California that only covers or represents 3 companies at a time. And our relationship with them has been exceptional over the years.”