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01/11 16:02
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call summary indicates mixed signals: modest improvements in same-store sales and effective marketing spend are positive, but negative sales projections and planned restaurant closures are concerning. The strategic focus on technology and innovation is promising, yet the lack of strong guidance and financial pressures on franchisees temper optimism. The Q&A reveals cautious macro assumptions and supportive franchisee sentiment, but also highlights financial challenges. Overall, these factors suggest a neutral stock price movement, with no strong catalysts for significant change.
Jack in the Box system same-store sales Declined 7.4% year-over-year. Franchise same-store sales decreased 7.6%, and company-owned same-store sales were down 5.3%. The decline was due to a decrease in transactions and negative mix, partially offset by a 2.4% increase in price.
Jack in the Box restaurant level margin Decreased by 240 basis points year-over-year to 16.1%. The decline was driven by sales deleverage, commodity inflation of 6.9%, and elevated labor costs due to opening 8 new restaurants in Chicago.
Food and packaging costs for Jack in the Box Remained flat at 30.3% of company-owned sales. Favorable funding from a new beverage contract and price increases offset commodity inflation and negative mix as consumers shifted to price-pointed promotions.
Labor costs for Jack in the Box Increased by 100 basis points to 33.7% of company-owned sales. This was primarily due to elevated labor costs at new restaurant openings in Chicago, partially offset by a reversal of additional FUTA taxes in California.
Occupancy and other operating costs for Jack in the Box Increased by 130 basis points to 19.9% of company-owned sales. This was driven by higher costs for rent, security, and third-party delivery fees.
Del Taco system same-store sales Declined 3.9% year-over-year. Company-owned same-store sales were down 3.1%, and franchise same-store sales decreased 4.2%. The decline was driven by a decrease in transactions and unfavorable mix, partially offset by a 2.8% increase in price.
Del Taco restaurant level margin Decreased to 6.8% from 9.3% in the prior year. The decline was due to the impact of opening 17 locations in Colorado, transaction declines, and inflationary increases in commodities, slightly offset by menu price increases.
Food and packaging costs for Del Taco Increased by 260 basis points to 27.8% due to unfavorable mix and commodity inflation of 5.1%.
Labor costs for Del Taco Remained flat at 39% of company-owned sales. Elevated labor costs from reopening 17 locations in Colorado were offset by a reversal of additional FUTA taxes in California.
Consolidated adjusted EBITDA Decreased to $45.6 million from $65.5 million in the prior year. The decline was primarily due to lower same-store sales at both brands.
GAAP diluted earnings per share Decreased to $0.30 for the quarter compared to $1.12 in the prior year. Operating earnings per share, including certain adjustments, was $0.30 for the quarter versus $1.16 in the prior year.
Cash flows from operations For the quarter, cash flows were $33.7 million, and for the full fiscal year, they were $162.3 million.
Menu Changes: Implemented a barbell promotional strategy featuring $4.99 Bonus Jack combo and $5 Smashed Jack. Adjusted pricing on signature combos and increased cup sizes for small combos.
Culinary Innovation: Welcomed new executive chef, Ciaran Duffy, to lead innovation and improve food quality and craveability. Plans to bring back customer fan favorites for the 75th anniversary.
Market Expansion: Opened 8 new restaurants in Chicago, marking one of the fastest new market openings in recent history. Annual unit volumes in Chicago projected to exceed $2 million.
Operational Excellence: Restructured field teams to spend more time in restaurants, providing real-time coaching and accountability. Retrained the entire system with a focus on operational basics.
Restaurant Closures: Closed 38 restaurants under the JACK on Track initiative in Q4, with plans to close more underperforming locations in 2026.
Divestiture of Del Taco: Announced the pending sale of Del Taco to focus on the Jack in the Box brand. Proceeds will be used to pay down $263 million in debt.
Reimaging Program: Testing a proof of concept for a mini refresh of restaurants to generate modest uplift and planning a comprehensive reimage program for 2026.
Divestiture of Del Taco: The pending divestiture of Del Taco may pose transitional challenges, including potential disruptions in operations and the need to refocus entirely on the Jack in the Box brand.
Closure Program: The closure of underperforming restaurants could lead to short-term revenue losses and operational disruptions, even as it aims to improve long-term profitability.
Value Perception and Pricing: Challenges in maintaining a competitive value perception among customers, particularly as price increases to combat wage inflation have pressured customer check sizes.
Operational Discipline: Rebuilding operational discipline and retraining staff may take time and resources, potentially delaying improvements in performance.
Competitive Market Conditions: The quick-service restaurant (QSR) category is highly competitive, with consumers being cautious about spending, which could impact sales and profitability.
Commodity Inflation: Inflation in key commodities, particularly beef, is driving up costs and pressuring margins.
Labor Costs: Elevated labor costs, especially in new markets like Chicago, are compressing margins and impacting profitability.
Debt Levels: High debt levels (6x net debt to adjusted EBITDA leverage ratio) pose financial risks, particularly if revenue growth does not materialize as expected.
Restaurant Modernization: The reimage program and modernization efforts require significant investment and may not yield immediate returns.
Economic Uncertainty: External factors like government shutdowns and economic conditions are causing downward pressure on sales.
Same-store sales: Expect same-store sales for Jack in the Box brand to return to positive in 2026, utilizing a barbell promotional approach, enhancing operations, and improving the overall guest experience.
Del Taco divestiture: The divestiture and associated TSA are expected to be fully completed in Q1 2026, with the organization rightsized as a stand-alone Jack in the Box brand.
Restaurant closures: Closure of underperforming restaurants will be substantially completed in 2026, benefiting remaining restaurants through sales transfer and improved profitability.
Reimage program: A reimage program will begin later in 2026, impacting the majority of restaurants to drive stronger volumes and guest excitement.
Debt reduction: Significant progress in paying down debt is expected, with a market improvement in reducing overall debt levels by retiring the August 2026 tranche of securitization.
Adjusted EBITDA: Guidance for adjusted EBITDA is $225 million to $240 million for fiscal 2026.
Restaurant count: Expected to end fiscal 2026 with 2,050 to 2,100 restaurants.
Company restaurant level margin: Guidance for company restaurant level margin is 17% to 18%, including mid-single-digit commodity inflation and low single-digit wage inflation.
Franchise level margin: Guidance for franchise level margin is $275 million to $290 million, impacted by closures and real estate sales.
SG&A expenses: Expected SG&A expenses are $125 million to $135 million, with improvements anticipated in the second half of 2026 following the Del Taco sale.
Capital expenditures: Capital expenditures are expected to be less than $0.5 million in 2026.
Dividend Program: No specific mention of a dividend program or any changes to dividend payouts was discussed in the transcript.
Share Buyback Program: The company did not repurchase any shares in the fourth quarter. For the full year, the company repurchased 0.1 million shares for $5 million. As of year-end, $175 million remained under the Board-authorized share repurchase program.
The earnings call summary indicates mixed signals: modest improvements in same-store sales and effective marketing spend are positive, but negative sales projections and planned restaurant closures are concerning. The strategic focus on technology and innovation is promising, yet the lack of strong guidance and financial pressures on franchisees temper optimism. The Q&A reveals cautious macro assumptions and supportive franchisee sentiment, but also highlights financial challenges. Overall, these factors suggest a neutral stock price movement, with no strong catalysts for significant change.
The earnings call highlights a mixed picture: there are positive developments such as digital sales growth and strong franchisee support, but challenges remain with same-store sales and significant debt. The Q&A section reveals management's cautious optimism and some lack of clarity on critical metrics, which tempers enthusiasm. The lack of a new partnership announcement or significant positive catalyst, combined with ongoing operational challenges, suggests a neutral stock price reaction in the short term.
The earnings call revealed several negative factors: declining same-store sales, reduced margins, and a substantial noncash goodwill impairment leading to a significant GAAP loss. Despite maintaining guidance and some operational initiatives, the Q&A highlighted industry challenges, IT issues, and a cautious consumer base. The strategic alternatives for Del Taco and lack of clarity on closures add uncertainty. These factors, combined with reduced share repurchases and high debt, suggest a negative sentiment for the stock price in the near term.
The earnings call reveals several concerning factors: declining same-store sales, reduced margins, significant goodwill impairment, and a GAAP loss per share. Despite maintaining guidance, the financial health is weak with high debt levels and reduced share repurchase plans. The Q&A highlights industry challenges and company-specific headwinds, with management providing vague responses. The combination of these factors suggests a strong negative market reaction, potentially exacerbated by the lack of market cap information to gauge the impact.
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