Seeking Alpha
Profile| Send Message|
( followers)  

Two interesting trends emerge from Jack in the Box Inc.’s FQ408 conference call (JBX). How much are chains like McDonald's and Burger King Hurting?

Rising food costs:

Overall, food and packaging costs were about 180 basis points higher than the same quarter of last year, led by higher beef costs, which increased by more than 18% in the quarter. Alone, beef negatively impacted restaurant operating margin by approximately 100 basis points.

Shortening was up almost 60% and potatoes were up 8%. Combined, these commodities contributed to a 7% increase in overall food costs for the quarter.

Beef is our single largest food cost accounting for nearly 20% of our spend. The high beef costs we're seeing are primarily driven by still high trim prices which are running over 50% higher in quarter one than a year ago, with 50's at about $0.81 a pound versus $0.53 a pound last year in the quarter. However… we expect moderation in the price of 50's as we move through the rest of the year.

California improves as other markets slow?

California became negative quarter two of ’08. So in quarter four we’re almost, in fact all the major California markets became positive. What we’re seeing system wide now in the east in the Texas markets the same store sales slowed down slightly and that’s because they were rolling over very high numbers in ’07 10% plus in ’07.

Source: Restaurant Chains Cry: 'Where's the Beef?'