California is certainly not a picture of fiscal or economic health, but here is an interesting positive data point.
JACK management implied that their primary trouble spot is Texas rather than California. California is a crucial market for the restaurant industry with many companies, such as JACK, CPKI, CAKE, and PEET having significant percentages of their system units located in the Golden State. Indeed, Chairman, CEO and President, Linda Lang said that the company has seen an improvement in their California and Texas markets but “significant” improvements in underlying fundamentals at Jack in the Box are not expected until high unemployment rates in these markets for their key customer demographics begin to improve.
While the typical JACK customer has not seen any recovery in California, some companies such as CPKI and CAKE have seen a pickup in their California trends. The chart below shows the improvement seen in Retail Sales and Use Tax Receipts in California and in Knapp Track casual dining sales trends. While it may take more time for JACK to see any improvement in its fundamentals, it is clear that that higher-end spending patterns have recovered significantly.