Jack in the Box Inc. (JACK) Q2 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call presents a mixed picture: positive trends in franchisee support, digital sales, and beverage offerings are offset by declining margins, slow store closures, and vague refinancing plans. The optimistic guidance on comps and World Cup sales, along with efforts to improve operations, provide some positivity. However, the lack of specific guidance and challenges in menu and marketing strategies temper expectations, leading to a neutral outlook for stock price movement.
Key Financial Performance
Same-store sales Decreased 3.8% year-over-year, with franchise restaurant same-store sales down 3.9% and company-owned same-store sales down 2.8%. The decline was primarily due to a decrease in transactions, partially offset by menu price increases.
Restaurant level margin percentage Decreased to 16.4% from 19.6% year-over-year. This was driven by a 5% commodity inflation, particularly elevated beef costs, and a 180 basis point increase in labor costs due to a change in the mix of restaurants.
Food and packaging costs as a percentage of sales Increased to 28.9%, up 110 basis points from the prior year, driven by 5% commodity inflation.
Labor costs as a percentage of sales Increased to 35.6%, up 180 basis points from the prior year, primarily due to a change in the mix of restaurants.
Franchise-level margin Decreased to $60.5 million or 37.9% of franchise revenues, compared to $68.3 million or 40% a year ago. The decline was due to lower sales driving lower rent revenue and royalties, a decrease in the number of restaurants, and lower lease termination fees.
SG&A (Selling, General, and Administrative expenses) Decreased to $26.4 million or 10.4% of revenues, compared to $28.2 million or 10.6% a year ago. The decrease was primarily due to market fluctuations of COLI policies and lower legal costs, partially offset by higher stock-based compensation due to prior year forfeitures.
Earnings from continuing operations Decreased to $12.5 million, compared to $20.7 million in the same quarter of the prior year.
GAAP diluted earnings per share from continuing operations Decreased to $0.65, compared to $1.09 in the same period of the prior year.
Operating earnings per share Decreased to $0.76, compared to $1.25 in the same quarter of the prior year.
Adjusted EBITDA Decreased to $51.3 million, down from $61.5 million in the prior year, primarily due to lower sales performance and restaurant closures.
Total debt outstanding $1.6 billion at quarter end, with a net debt to adjusted EBITDA leverage ratio of 6.9x.
Proceeds from real estate sales Generated $14.7 million year-to-date, with expectations to sell additional real estate for $35 million to $45 million by the end of the fiscal year.
Capital expenditures $34.5 million year-to-date, primarily for restaurant IT and new restaurants, including $5 million due to timing of payments for Chicago restaurant openings in Q4 of the previous year.
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Operating Highlights
Smashed Jack Sliders: Introduced as a premium innovation, available in various formats such as a 1-piece add-on, 3-piece combo, Munchie Meal, and party pack. This product contributed to check growth and reinforced the barbell strategy.
Hot Ones Munchie Meals: Upcoming marketing campaign featuring a collaboration with Hot Ones, introducing two new Munchie Meals to drive sales.
Digital Channels: Improved offer lineup on first- and third-party digital channels, driving higher and more profitable checks.
Mini Refresh Program: Accelerated pace of mini refreshes for company and franchise restaurants, delivering measurable sales improvements with limited capital outlay.
Marketing Calendar Streamlining: Streamlined marketing calendar to improve operational execution in restaurants.
Debt Reduction: Focused on reducing debt, including prepaying $99 million of the August 2026 tranche early in Q3 and selling additional real estate to generate $35-$45 million in proceeds by fiscal year-end.
JACK on Track Plan: Focused on improving long-term financial performance, strengthening the balance sheet, and positioning the company for sustainable growth.
Franchisee Support: Prioritized franchisee success by driving stronger margins and profitability, ensuring franchisees thrive as a core operational focus.
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Risk or Challenges
Same-store sales decline: Jack in the Box experienced a 3.8% decline in same-store sales in Q2 2026, driven by a decrease in transactions, which could impact revenue and profitability.
Commodity inflation: Food and packaging costs increased due to 5% commodity inflation, with elevated beef costs expected to remain in double digits through Q3, pressuring margins.
Labor costs: Labor costs rose to 35.6% of sales, increasing 180 basis points from the prior year, primarily due to changes in the mix of restaurants, impacting profitability.
Franchise-level margin decline: Franchise-level margin decreased to 37.9% from 40% a year ago, driven by lower sales, reduced rent revenue, and fewer restaurants, which could affect franchisee profitability and overall financial performance.
Debt levels: The company has a high debt level of $1.6 billion with a net debt to adjusted EBITDA leverage ratio of 6.9x, posing financial risk and limiting flexibility.
Restaurant closures: Accelerated restaurant closures are expected in the second half of the year, which could disrupt operations and reduce revenue.
Sales deleverage: Occupancy and other costs increased due to sales deleverage, further pressuring margins.
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Guidance & Outlook
Same-store sales: For fiscal year 2026, the company expects a same-store sales decline of low single digits. Q1 was the lowest point, with steady improvement anticipated through Q3 and further into Q4.
Marketing and product innovation: The company plans to launch a marketing campaign featuring a collaboration with Hot Ones, introducing 2 new Hot Ones Munchie Meals. The strategy includes consistent value offerings and premium innovation to improve trends through a balanced barbell strategy.
Restaurant-level margin: Expected to be approximately 17%, including mid-single-digit commodity inflation and low single-digit wage inflation.
Franchise-level margin: Projected to be between $265 million and $275 million, reflecting expectations about closures and real estate sales.
SG&A expenses: Anticipated to be between $115 million and $125 million, excluding any gains or losses from COLI.
Adjusted EBITDA: Expected to range between $225 million and $235 million for the fiscal year.
Capital expenditures: Year-to-date spending was $34.5 million, primarily on restaurant IT and new restaurants. Additional real estate sales are expected to generate $35 million to $45 million by the end of the fiscal year, with proceeds used to pay down debt.
Debt reduction: The company plans to prepay approximately $99 million of the August 2026 tranche early in Q3, with a pro forma leverage ratio of approximately 6.2x after the prepayment.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:What skill set is needed to accelerate the turnaround plan and what are the top priorities for the new hire?
A:Mark King emphasized the need to address transactions and same-store sales. He mentioned focusing on innovation, value, core products, marketing, and simplifying the menu to drive sales. He also highlighted the importance of focusing on a few key items to make a significant impact.
Q:What is being done to support franchisee health and address profitability challenges?
A:Mark King mentioned that COO Shannon McKinney has formed a committee with franchisees and corporate members to address challenges. He emphasized simplifying the menu and back-of-house operations to unlock profitability and address labor issues. He acknowledged that commodity price increases are beyond their control.
Q:What drove the improvement in same-store sales in the third quarter and how does it compare to the industry?
A:Dawn Hooper attributed the improvement to a balanced barbell strategy, better deals, sliders, and operational excellence. She noted improvements in customer satisfaction, accuracy, and friendliness, which are leading indicators of better operations and sales.
Q:What are the catalysts and differences expected to drive stronger performance in the back half of the year?
A:Dawn Hooper highlighted the focus on value, $5 price point deals, the World Cup FIFA event, non-food items like Jibbitz, and collaborations such as the Hot Ones promotion. She also mentioned operational improvements as a key driver.
Q:Has there been any change to the number of targeted store closures?
A:Dawn Hooper stated that the number of targeted closures remains the same, but the pace has been slower than anticipated. Closures are expected to accelerate in the back half of the year, with franchisees showing more interest and efforts being made to engage landlords to exit leases.
Q:What is the status of refinancing conversations and what steps are being taken?
A:Dawn Hooper mentioned that they are actively working with advisers and evaluating market conditions. She noted headwinds on the cost side but stated that they are optimizing solutions based on market conditions. More details will be shared later in the summer.
Q:What is driving the revised co-op margin guidance and how does it align with commodity and wage inflation outlooks?
A:Dawn Hooper explained that beef prices, which were up double digits in Q1-Q3, are expected to moderate to low single digits in Q4. She also mentioned improvements in the Chicago market and plans to expand operating hours to drive margins.
Q:What led to the revised comp guidance and what is the plan to address weaknesses?
A:Dawn Hooper noted that a niche premium item (Hot Mess Burger) underperformed, while sliders with broader appeal performed better. The plan is to focus on more broadly appealing options on the higher end of the barbell strategy.
Q:What updates are there on digital sales and profitability in the channel?
A:Rachel Webb highlighted efforts to balance discounting with higher check benefits. She mentioned working with franchisees to optimize offer mechanics and profitability, and noted changes to the first-party platform to reduce aggressive discounting.
Q:What has been the response to the new matcha drinks and does it signal a broader move towards diverse beverage and snack categories?
A:Rachel Webb stated that the beverage category has been a bright spot and that matcha and other unique offerings have seen good success. These will be pulsed throughout the year to drive trial.
Q:Is there a need for company-funded marketing investments in the second half?
A:Mark King stated that he does not believe additional company-funded marketing investments are needed. Instead, he emphasized the need for more efficient use of existing funds and a focus on fewer impactful items.
Q:What is the status of the core menu pricing architecture and are there plans for further adjustments?
A:Rachel Webb and Mark King mentioned improvements in value scores after capping some combo prices at $9.99. They emphasized the importance of constructing a relevant value brand and pricing structure to drive sales and profitability.
Q:How are quarter-to-date comps performing and what is the impact of macroeconomic factors?
A:Dawn Hooper and Rachel Webb noted that quarter-to-date comps are improving due to a balanced barbell strategy and operational excellence. They stated that macroeconomic factors like gas prices are not expected to have a significant impact, and trends are consistent across regions.
Q:What are the plans for the World Cup and other initiatives in Q3?
A:Dawn Hooper mentioned that the World Cup is expected to boost sales in Q3. She also highlighted an exciting collaboration planned for the end of the year, which is expected to drive customer excitement.
Q:What are the biggest opportunities for operational improvements in the next few quarters?
A:Mark King emphasized the importance of supporting franchisees with training, profitability, and better operating standards. He highlighted COO Shannon McKinney's efforts to improve operations and the need to double down on resources in this area.
Q:How are Hispanic and low-income consumer cohorts performing relative to system averages?
A:Rachel Webb stated that trends among Hispanic consumers have improved stronger than the rest, and there is better traction from these cohorts.
Q:What is the updated guidance on store closures for the year?
A:Dawn Hooper indicated that closures are expected to accelerate in the back half of the year, and the total number will likely be within the previously guided range of 50 to 100 closures.
Q:What are the key challenges for Jack in terms of assets, marketing, and operations?
A:Mark King identified challenges across all areas, including operations, marketing, and asset improvement. He emphasized the need for better menu construction, pricing, customer experience, and franchisee execution. Dawn Hooper mentioned a mini refresh program to improve the brand image with low-cost updates.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the refinancing conversations, stating that more information would be shared later in the summer. Additionally, they did not elaborate on the exciting collaboration planned for the end of the year, citing confidentiality.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Box Conference
Box Lance
Box franchisees
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CEO detail
CEO focus
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Conference Instructions
Directors excitement
Finance remark
Form discussion
Form document
Interim CEO
Interim Chief
JACK addition
JACK sense
Lance foundation
Officer Vice
Officer afternoon
President Strategic
Relations statement
Strategic Finance
addition JACK
afternoon today
appearance restaurant
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brand model
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capital outlay
center
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guest experience
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path
success
today Interim
urgency
JACK Transcript
Jack in the Box Inc. (JACK) Q2 2026 Earnings Call Transcript
Unknown5-14
The earnings call presents a mixed picture: positive trends in franchisee support, digital sales, and beverage offerings are offset by declining margins, slow store closures, and vague refinancing plans. The optimistic guidance on comps and World Cup sales, along with efforts to improve operations, provide some positivity. However, the lack of specific guidance and challenges in menu and marketing strategies temper expectations, leading to a neutral outlook for stock price movement.
Jack in the Box Inc. (JACK) Q1 2026 Earnings Call Transcript
Unknown2-18
The earnings call summary presents a mixed picture: while there are positive developments like debt reduction and improved January sales, challenges such as labor inefficiencies and inflationary pressures persist. The Q&A section reveals some optimism, especially with positive initial responses to marketing and technology investments, but concerns remain about regional performance and inflation impacts. Adjusted EBITDA and restaurant margin guidance are moderate, and the lack of clear guidance on some issues tempers enthusiasm. Overall, the sentiment is neutral, with no strong catalysts to drive significant stock price movement.
Jack in the Box Inc. (JACK) Q4 2025 Earnings Call Transcript
Unknown11-19
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 Inc. (JACK) Q3 2025 Earnings Call Transcript
Unknown8-6
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.
JACK Report
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