NEW YORK – Jack in the Box Inc. (JBX) Wednesday scrapped its test of the more upscale JBX Grill (search) restaurants and said the costs of revamping its namesake hamburger chain would hurt profits, sending its stock down nearly 14 percent.
The company cut its earnings estimate for the fourth quarter ending on Oct. 2, mainly because of a $2 million charge to end the JBX Grill experiment. It also cited a disappointing launch of a premium sandwich at Jack in the Box restaurants as well as higher gasoline prices that could benting earnings for the next fiscal year, when it plans to renovate up to 150 of the hamburger restaurants as part of program to develop the chain into a national brand.
The effort also includes developing new menu items, upgrading service and opening new restaurants.
The San Diego-based company did not disclose how much it had invested in JBX Grill, whose fast-casual restaurants were designed to appeal to a broad customer base. It did say it could best use JBX Grill's menu, service and design elements across its 2,000 namesake restaurants rather than at a separate chain.
Jack in the Box said incorporating JBX Grill concepts into its existing restaurants will require lower capital investment and is likely to generate higher returns.
The company, which plans aggressive growth of franchised Qdoba Mexican Grill (search) restaurants, lowered its fourth-quarter earnings estimate to 56 cents a share from 63 cents. The JBX Grill charge accounts for 5 cents of the anticipated shortfall.
For fiscal 2006, Jack in the Box forecast profit of $2.50 to $2.54 per share. Analysts on average were expecting $2.61, according to Reuters Estimates.
Jack in the Box said capital expenditures would rise next year to between $140 million and $150 million from $125 million estimated for fiscal 2005. The increase stems in part from the costs of revamping 100 to 150 Jack in the Box restaurants in fiscal 2006.
A company spokesman said Jack in the Box had been testing JBX Grill since December at five restaurants in Boise, Idaho, and four others in Bakersfield, Calif.
Those nine restaurants were an extension of an initial test conducted at two locations in San Diego from March 2004. Test outlets averaged about 2,400 square feet in size.
Jack in the Box also said its board of directors has authorized a $150 million program to repurchase its common stock over the next three years.
The company's shares were down $4.20, or 12.5 percent, at $29.32 in New York Stock Exchange trade. Earlier the stock it a one-year low of $28.95.