Shares of fast-food chain Jack in The Box (JACK) are down 46 cents, or 2%, at $22.87 after Credit Suisse analyst Keith Siegner downgraded the shares to “Neutral” from “Outperform” following a fiscal Q2 EPS report yesterday afternoon that missed estimates by a wide margin.
Jack reported 32 cents per share, missing the average 40-cent estimate, as sales 8.4%, year over year. The company forecast EPS this year in line with estimates.
The company’s problems are not just about cyclical recovery, but about problems in winning market share, writes Siegner. He cut his EPS estimate for this year to $1.86 from $1.95, below the company’s forecast yesterday of $1.85 to $2.05, predominantly to reflect lower sales of its stores to franchisees.
There’s also a 1-penny per share profit hit from lower same-store sales at company-owned and franchised stores.
The company’s trying to do too many things to fix its business all at once, writes Siegner, focusing on both value customers and premium customers, brand-building, etc. — “Resources are spread to thin to resonate with the target consumer in any particular area,” he concludes.
Update: Siegner emailed to clarify that the main reason for his cutting EPS estimate this year was to reflect lower sales of stores by the company to franchisees.
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