Jack In The Box 2008 Annual Report Download - page 3

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DEAR FELLOW SHAREHOLDERS,
We’re pleased to report that Jack in the Box Inc. delivered
earnings per share growth of more than 7% in fiscal 2008
despite challenges on several fronts — from the slowing
economy and food cost inflation to tightening credit markets
and a damaging hurricane. Our performance under such diverse
business and operating conditions is a testament to the
strength and flexibility of our long-term strategic plan, which
continues to focus on brand reinvention, expanding franchising,
improving the business model and growth.
2008 Financial Performance — Net earnings for fiscal 2008
totaled $119.3 million, or $2.01 per diluted share, compared with
$125.6 million, or $1.87 per diluted share in fiscal 2007. Fiscal
year 2008 results include a negative impact of approximately
4 to 5 cents for losses and costs related to Hurricane Ike.
With the nation’s recessionary economy impacting consumer
spending, same-store sales at Jack in the Box®company
restaurants increased 0.2% in fiscal 2008 on top of a very
strong 6.1% increase in fiscal 2007. The effective price increase
at company restaurants was approximately 2.2% for the year,
less than many in our industry as we believe we should remain
cautious about how aggressively we raise prices due to the
economic pressures that our guests are facing. Our approach
was to focus primarily on improving the cost structure of our
restaurant operations by managing labor and introducing
higher-margin new products while also controlling G&A expenses.
Our focus continues to be on premium products versus deep
value or discounting messages. We have a tiered menu strategy
that is keeping our brand relevant to a wide range of consumers,
including those trading down from other restaurant categories,
as well those whose discretionary spending has been especially
hard hit by the country’s economic problems. We provide variety
on our menu, including innovative products that are not typically
offered in the QSR segment, such as the Real Fruit Smoothies
that we launched in the second quarter and our Breakfast Bowls
and Pita Snacks, which we introduced in the fourth quarter.
As with our Jack in the Box restaurants, Qdoba Mexican Grill®
is also feeling the impact of a difficult economy. Still, system
same-store sales at Qdoba were up 1.6% on top of a fiscal
2007 increase of 4.6%.
Our business continued to be impacted by pressures from
increased commodity costs. In 2008, food and packaging costs
were 150 basis points higher than last year. Beef costs, which
represent our largest single commodity expense, increased by
more than 5%, and higher costs for cheese, shortening and
potato items contributed to a 5.5% increase in overall commodity
costs for the year. For the year, utilities were also approximately
30 basis points higher than in fiscal 2007. These factors
contributed to a 180 basis points decrease in restaurant
operating margin in fiscal 2008 versus fiscal 2007.
Strategic Initiatives — In September, our board of directors
approved the continuation of the company’s strategic plan and
the following four key initiatives comprising that updated plan.
Our first strategic initiative, and certainly the one most apparent
to our guests, is reinventing the Jack in the Box brand to
differentiate Jack in the Box from the competition and deliver
a restaurant experience superior to that typically found in the
QSR segment. Brand reinvention focuses on major improvements
in the following areas: