Jack in The Box

Jack in the Box
Jack in the Box (Photo credit: Wikipedia)

I’m All Right Jack ?

JACK : NASDAQ : US$36.82

Jack in the Box‘s second-quarter profit fell 39% as the restaurant operator posted weaker sales, and the year-earlier was boosted by a large gain on the sale of restaurants. For the quarter ended April 14, Jack in the Box reported a profit of $13.3 million, or 29 cents a share, down from $21.6 million, or 48 cents a share, a year earlier.

The latest period included a loss of three cents a share that was mainly attributable to refranchising, while the year-earlier period saw a 21 cents ashare gain from refranchising. Excluding such items and restructuring charges, operating earnings were 33 cents, up from 30 cents. Revenue declined 3% to $355.6 million. Analysts surveyed had projected a per-share profit of 31 cents and revenue of $359 million. Same-store sales rose 0.9% at Jack in the Box company restaurants and slipped 2% at Qdoba company restaurants.

The company in February anticipated same-store sales will be flat at Jack in the Box and flat to down 2% at Qdoba. Restaurant operating margin widened to 15.8% from 15.5%, as company restaurant costs decreased 5%.

For the year, Jack in  the Box lifted its operating earnings guidance for the year, now expecting $1.55-1.65 a share, compared to its earlier forecast of $1.48-1.63 a share.

Dollar General

Dollar General 300
Dollar General 300 (Photo credit: Wikipedia)

DG : NYSE : US$50.91

Dollar General said sales growth this year could surpass the strength it saw in 2012 as increased demand for food
and other basics helps drive gains despite consumers’ concerns about the economy.

The company’s fourth-quarter profit came in well ahead of analysts’ expectations despite lighter-than-anticipated sales growth. Dollar General earned $317.4 million, or $0.97 per share, in the fourth quarter ended on February 1, up from $292.5 million, or $0.85 per share, a year earlier.

Sales rose 0.5% to $4.21 billion. Analysts, on average, expected $0.90 per share on sales of $4.26 billion. Sales at stores open at least a year, or same-store sales, rose 3%. The same-store sales surpassed a 1% rise in such sales at Wal-Mart (WMT) U.S. in its fourth quarter, yet came in at the low end of Dollar General’s forecast of 3 to 4% growth.

The sales gains at existing stores were  helped primarily by consumables, or items such as food and household basics. More shoppers came into the stores and spent more on their purchases, the discount chain said. Dollar General expects to earn $3.15-3.30 per share on an adjusted basis this year, with total sales up 10-12% and same-store sales up 4-6%.

Best Buy Soldiers On

Image representing Best Buy as depicted in Cru...
Image via CrunchBase

BBY :

NYSE : US$17.16
Best Buy’s fiscal fourth-quarter loss narrowed sharply as the big-box consumer-electronics retailer recorded fewer onetime
charges, although core earnings dropped as same-store sales declined.

The quarterly report came a day after Best Buy ended talks with its largest shareholder and founder, Richard Schulze, over a deal in which he and a group of buyout firms were proposing to take a minority stake in the firm in exchange for three seats on the board.

For the quarter, Best Buy reported a loss of $409 million, or $1.21 a share, versus a loss of $1.82 billion, or $5.17 a share, a year earlier. Among other items, the latest quarter included $202 million in restructuring charges, $822 million in goodwill impairments, and an $18 million gain on the sale of investments. The year-ago period included $32 million in restructuring charges, $1.21 billion in goodwill impairments and a $55 million gain. Stripping out one-time items, per-share earnings were $1.64 versus $2.18 a year ago.

Revenue was roughly flat at $16.71 billion. Analysts expected earnings of $1.54 a share on $16.34 billion in revenue. “It was a quarter that was driven, not given,” said Joly, adding that Best Buy is “intently focused on the two problems we have to solve: stabilizing and improving our comparable store sales and increasing profitability across our global businesses.”

J.C. Penny – The Weak Sister In Retail Family

JCPenney in Frisco, TX
JCPenney in Frisco, TX (Photo credit: Wikipedia)

JCP

 NYSE : $17.57
J.C. Penney was taking it on the chin Thursday after reporting weak Q4 results, with CEO Ron Johnson admitting the company had made big mistakes in its turnaround effort.

The retailer posted a loss of $2.51 per share, much wider than the $0.24 loss that analysts had expected while same store sales sunk by 31.7%. Internet sales, which have been rapidly increasing across the industry, fell by 34.4% at JCP. Revenue fell 28.4% to $3.8 billion. Johnson said that in his quest to “be the favorite store for everyone:, the retailer had made some errors, including marketing issues and an assessment that customers want simple pricing without constant sales.

He commented, “I had a personal conviction to deliver everyday value beginning with truth on the price tag. We worked really hard and tried many things to make the customer understand that she could shop anytime on her terms. But we learned she prefers a sale, at times she loves a coupon and always, she needs a reference price.”

Going forward, the company will be running sales, as opposed to “everyday low pricing” and will begin to offer some coupons.

YUM Reports

English: kfc of china
English: kfc of china (Photo credit: Wikipedia)

UPDATE: Yum! Brands’ fourth-quarter earnings release is out.

the company reported adjusted earnings of $0.83 per share in Q4, slightly ahead of expectations of $0.82.

Revenues came in at $4.15 billion, also just above estimates of $4.12 billion.

The company said same-store sales in China were down 6 percent in the quarter, partly due to a probe into KFC by the Shanghai FDA.

The company also said it doesn’t see itself achieving earnings growth in 2013.

Below are highlights from the press release:

  • China Division KFC same-store sales turned sharply negative during the last two weeks of December as a result of adverse publicity from the poultry supply situation.
  • Worldwide system sales were flat, prior to foreign currency translation.
    • Worldwide system sales growth was 5%, excluding the 2011 divestiture of LJS and A&W, the 53rd week impact and the acquisition of Little Sheep, including 7% in China, 7% at YRI and 3% in the U.S.
  • Same-store sales grew 3% at YRI and 3% in the U.S. Same-store sales declined 6% in China.
  • Worldwide restaurant margin increased 0.1 percentage point to 14.4%.
  • Worldwide operating profit grew 6%, prior to foreign currency translation. Operating profit grew 10% at YRI, declined 5% in China and declined 5% in the U.S.
    • Excluding the 53rd-week impact, worldwide operating profit grew 11%, including 15% at YRI and 5% in the U.S.

Below are sections on the China situation, the 2013 outlook, and comments from the CEO:

CHINA UPDATE

KFC sales in the last two weeks of the fourth quarter were significantly impacted by the intense media attention surrounding an investigation by the Shanghai FDA (SFDA) into poultry supply management at Yum! China. The investigation was prompted by a report broadcast on China’s national television (CCTV), which aired on December 18, 2012. The report showed that a few poultry farmers were ignoring laws and regulations by using excessive levels of antibiotics in chicken. Regrettably, some of this product was purchased by two poultry suppliers of KFC China. The investigation caused further media attention, including social media commentary, and this negatively affected consumer perceptions of poultry safety, and KFC in particular.

On January 25, 2013, the SFDA concluded its investigation and released its recommendations. We appreciate their thorough and diligent review. The SFDA identified issues and provided “Supervisory Recommendations” to Yum! China to strengthen our poultry supply chain practices including refined voluntary self testing procedures, improved reporting and communications and enhanced supplier management. Ourteam in China has taken a comprehensive review of our current system and is in the process of incorporating all of the SFDA’s recommendations. We have always recognized the importance of building a world-class supply chain in China, which is why we have implemented a wide range of quality assurance and testing practices over the years above legal and regulatory standards. The SFDA’s recommendations will further strengthen those practices. The SFDA did not bring a case against Yum! China and no fine was assessed.

The past seven weeks of media attention have been intense and negative towards the KFC brand image. Even though this is a very disappointing setback, we are more committed than ever to continue to strengthen our efforts, restore the confidence of our customers and win back their brand loyalty. To that end, the China team will soon be launching a brand reputation quality campaign to re-assure consumers of our high quality food, along with aggressive marketing plans.

2013 OUTLOOK

We are confident the YRI and U.S. businesses will deliver annual operating profit growth consistent with our ongoing growth model. Given current uncertainties related to KFC sales in China, it is difficult to confidently forecast our overall financial performance. We have made the assumption that KFC China same-store sales will improve as the year progresses and will be positive in the fourth quarter. With these assumptions, we estimate a mid-single digit EPS decline in 2013 versus prior year, excluding Special Items. This includes an expectation for a significant decline in EPS performance in the first half of the year followed by EPS growth in the second half.

The first quarter for our China business includes only the months of January and February and is highly impacted by consumer spending during the Chinese New Year holiday. The timing of this holiday changes each year. This year it is important to note that while the timing impact of Chinese New Year is neutral to our first quarter, there is a significant negative impact to January sales and a corresponding significant benefit to February sales due to the timing of this week-long holiday. We expect that the underlying performance of our China business will remain relatively unchanged for the balance of the first quarter, with a same-store sales decline of approximately 25% for January and February combined (China’s first quarter).

DAVID NOVAK COMMENTS

David C. Novak, Chairman and CEO, said, “We delivered full-year 2012 EPS growth of 13% or $3.25 per share, excluding Special Items. This marks the 11th consecutive year we delivered at least 13% growth, which puts us in an elite group of high-growth companies. We also take satisfaction with our record level of international development in 2012 which lays the foundation for future growth and makes Yum! a leader in emerging market development. With new-unit development at the core of our growth model and the continued rapid expansion of the consuming class overseas, we believe our opportunity for long-term growth has never been better.

“We are obviously proud of our track record of achieving double-digit EPS growth, and I am as confident as ever we can deliver this performance over the long term. However, as a result of adverse publicity from the poultry supply situation in mid-December, China KFC sales experienced a sharp decline. Due to continued negative same-store sales and our assumption that it will take time to recover consumer confidence, we no longer expect to achieve EPS growth in 2013.

“Although we cannot predict how long it will take to restore sales, we are steadfast in our belief that the power and popularity of the KFC brand in China will ultimately drive a full sales recovery. Having weathered other storms in the past, we know that our brands are resilient. As a result, we will stay the course with our target to develop at least 700 new units in 2013 in China to lay the foundation for future growth, and will not let this event detract from our unparalleled China growth opportunity.

“Our growth strategies are unchanged, in China, Yum! Restaurants International, India and the U.S. With our category-leading brands and outstanding people capability, I’m confident we will bounce back strongly and restore our track record of double-digit EPS growth in the years ahead.”

Dollar General Update

Dollar General
Dollar General (Photo credit: Wikipedia)

Dollar General

(DG : NYSE : US$42.78)

Dollar General on Tuesday posted a bigger-than-expected increase in profit, but said it remained cautious about the rest of the year despite an encouraging start to the holiday season, sending shares lower.

Third quarter profit rose to $207.7 million, or $0.62 per share from $171.2 million, or $0.50, a year earlier. Earnings rose to $0.63 per
share, after adjusting for items such as expenses from a secondary offering and debt amendment fees, topping the analysts’
average target of 60 cents.

Sales jumped 10.3% to $3.96 billion, in line with analysts’ expectations. Sales at stores open at least a year, or same-store sales, rose 4%. Dollar General is now calling for a fiscal-year profit of about $2.82-2.85 per share, versus a September forecast of about $2.77-2.85 per share. Both outlooks included about 4 cents per share from the favorable resolution of tax audits in the second quarter and fell short of analysts’ average estimate is $2.86.

Dollar General expects sales to rise by 8.0-8.5% this fiscal year, after sticking to a forecast of 8.0-9.0% growth in September. It expects same-store sales to rise 4.5- 5.0%, versus a September forecast of 4-5%. For the current fourth quarter, it expects same-store sales to rise 3-4%.

Francesca’s Holdings Corporation Buy Target $ 30

Francesca
Francesca (Photo credit: Paolo Neoz)

Nov. 19

Francesca’s Holdings Corporation

FRAN : NASDAQ : US$23.95
BUY Target: US$30.00

COMPANY DESCRIPTION:
Francesca’s Holdings Corporation is the holding company for specialty retailer Francesca’s Collections. Through a national chain of over 350 retail boutiques and an ecommerce web site, Francesca’s sells apparel, jewelry, accessories, and gift items with an assortment tailored to its core 18-35 year-old, fashion-conscious female customer .

Investment recommendation
We believe FRAN’s unique business model positions the company to profitably expand its store base. A low-cost, small-footprint store model has translated to EBIT margins in the mid-20% range and one of the specialty retail group’s highest ROIC at around 30%. We expect FRAN’s boutique feel, driven by a broad and trend-right product assortment, should continue to resonate with customers as the company expands square footage at the highest annual rate among all of the companies in our coverage universe.

We estimate double-digit SSS growth will persist in FY13, and we are modeling for EPS of $1.29.

Investment highlights
 We forecast annual square footage growth of 18% over the next five years. By comparison, the specialty retail group average is +6%.
 FRAN’s growth potential warrants a premium to the specialty apparel peer group. We estimate sales and EPS will grow at annual rates of 29% and 39%, respectively, over the next three years versus the group averages of 8% and 19%.