• by Karlene Lukovitz  @KLmarketdaily, February 18, 2009

A new marketing campaign premised on mascot Jack Box being run over by a bus generated brand awareness for Jack in the Box during this year's first quarter, but the parent company's financial performance was lackluster.

Jack in the Box Inc., comprising the Qdoba Mexican Grill chain as well as the namesake QSR chain, saw its Q1 fiscal '09 net earnings fall nearly 22%, to $28.4 million. Net earnings per diluted share declined to 49 cents versus 60 cents in first quarter fiscal '08 -- below its own forecast and three cents below analysts' expectations. Consolidated operating margin was 14.6% versus 17.1% in the same period last year.

Same-store sales for company-owned Jack in the Box units grew 1.7% (compared to a 1.5% increase in last fiscal year's first quarter) but comparable-store sales for Qdoba declined 1.1%. Combined restaurant sales declined 2.9%, to $628.7 million. Franchise restaurant revenues increased 1.6%.

Jack in the Box sales were driven by the introduction of Teriyaki Bowls in the Western U.S. in October and a full-system $2.99 Jumbo Deal (a hamburger, two tacos and a small fries) during the last three weeks of the quarter.

However, operating costs were nearly 8% higher than in Q1 fiscal 2008, primarily due to food and packaging costs (beef costs were nearly 20% higher).

As part of an ongoing initiative, the company sold 29 company-owned Jack in the Box restaurants to franchisees during the quarter, yielding $18.4 million. The Jack in the Box system is now 39% franchised, and the parent company plans to reach a 70% to 80% franchise level by 2013.

Sixteen new Jack in the Box restaurants and 17 new Qdoba restaurants were opened in the first quarter. For full fiscal '09, the company is planning about 50 new Jack in the Box units and between 60 and 80 new Qdoba units.

The company is continuing initiatives to "reinvent" the Jack in the Box brand through menu innovation, redesign of its units and customer service improvements.

In addition to the Teriyaki Bowls, which rolled out to the full U.S. on Jan. 29, menu introductions during Q1 included a Breakfast Homestyle Chicken Biscuit and Homestyle Ranch Chicken Club in the central and southeastern markets, a new Real Fruit Smoothie flavor (Pomegranate Berry) and Mini Churros (bite-sized cinnamon sugar-filled treats).

Second-quarter launches include Taco Nachos (value-priced crunchy tacos topped with nacho fixings and served with a side of salsa) and Mini Sirloin Burgers. The sirloin burgers are positioned as a premium item, intended to compete with the quality and taste of similar items offered by casual dining restaurants.

Chairman/CEO Linda A. Lang reported that the chain's new marketing campaign--kicked off with a Super Bowl commercial in which chain's "founder" Jack Box was hit by a bus and seriously injured--has generated more than 2.8 million online video views to date and nearly a million unique visitors to the campaign's Web site (hangintherejack.com).

The campaign--a series of Webisodes and TV commercials updating Jack's status and featuring characters from the office and hospital-- is focused on creating awareness that the full Jack in the Box menu can be ordered at any time of the day or night.

For the remainder of the year, the company is projecting that Jack in the Box sales will be flat to up by 2% and Qdoba sales flat to down by 2%. Costs are expected to moderate, to improve operating margin to 16%. Diluted earnings per share from continuing operations are projected at $2 to $2.20, including franchise gains.