Jack in the Box Inc. (NASDAQ: $JACK) is an American fast-food restaurant chain founded in 1951 that operates and franchises the Jack in the Box hamburger chain across 22 states as well as Del Taco, the second largest Mexican-American QSR chain in the U.S. The chain contains over 2,200 locations, mostly serving West Coast United States food items such as chicken tenders, French fries, hamburgers, cheeseburger sandwiches, tacos, and egg rolls, just to name a few.
The company announced financial results for its fiscal 2024 second quarter ending April 14, 2024, on Tuesday, May 14.
Q2 Earnings and Key Highlights
For the quarter, Jack in the Box reported earnings per diluted share of $1.26, compared to $1.27 in the prior-year quarter. Adjusted for one-time items, operating earnings per share was $1.46, flat compared to $1.47 last year.
Total revenues declined 7.7% to $365.3 million as the company continued refranchising efforts at Del Taco. Net earnings were $25.0 million, down from $26.5 million in Q2 2023.
Segment Performance
Jack in the Box Brand
The Jack in the Box brand saw same-store sales decrease 2.5% in the quarter, with franchise locations down 2.6% and company-owned stores declining 0.6%. Both segments experienced transaction declines partially offset by higher average check amounts.
Restaurant-level margin, a non-GAAP measure tracking profitability at company stores, improved to 23.6% from 21.4% a year ago. This was driven by additional company-owned units and lower commodity costs. Franchise-level margin dipped to 40.4% from 41.2% in the year-ago period due to the sales decline and resulting lower royalties and rents.
During the quarter, Jack in the Box expanded its footprint with 3 new restaurant openings and no closures. The brand now has 409 future locations under development agreements.
Del Taco Brand
Del Taco’s same-store sales fell 1.4%, comprised of a 1.1% franchise decline and a 1.8% company-owned drop. Transactions were down, but the average check was higher.
At company locations, the restaurant-level margin decreased to 16.8% from 17.3% a year earlier due to higher labor and utility costs. Franchise-level margin was 28.9%, down from 37.3% previously due to a higher franchise mix and payouts for rent and marketing. Del Taco opened 3 new restaurants in Q2 with no closures. The brand also refranchised 13 company-owned locations.
Outlook & Guidance
For the full 2024 fiscal year, Jack in the Box trimmed its outlook across several key metrics. Company-wide, the fast food chain now anticipates adjusted EBITDA between $325-$330 million, down from the previous $325-$335 million range. Operating earnings per share guidance was also lowered to $6.25-$6.40 versus the prior $6.25-$6.50 expectation.
At the Jack in the Box brand, same-store sales growth is now projected in the flat to low-single-digit range, a reduction from the earlier low-to-mid single-digit view. However, company restaurant margins increased to 22-23% from 21-23% previously. For Del Taco, Jack in the Box sees same-store sales flat to up low-single digits, compared to the former low-to-mid single-digit forecast. Franchise margins for Del Taco were cut to 27-29% from the original 29-31% guidance range.
CEO Commentary
“I am proud of the execution by our teams, delivering better-than-expected earnings and margins while navigating macro headwinds and pressure on low-income consumers,” said CEO Darin Harris.
Harris acknowledged the weaker-than-expected top-line performance but expressed confidence in regaining sales momentum through new product launches, value offerings, and marketing. He also highlighted the franchisee’s continued investment as a positive sign.
Jack’s Birthday Celebration
To celebrate its beloved mascot Jack Box’s birthday from May 13-19, Jack in the Box is offering Jack Pack rewards members a different free food item each day with any $1 purchase. The lineup includes wraps, tacos, chicken sandwiches, fries, drinks, and shakes.
Jack in the Box Stock Performance
Shares of Jack in the Box are surging in trading today, up by 4.6% to read $55.52 as of press, down from 8% at some point in early trading, with an intraday high of $59.07. While total revenues declined 7.7% due to refranchising efforts at Del Taco, Jack in the Box’s core brand saw improved restaurant-level profitability. The stock has remained relatively flat this week, gaining only 1.14% from Friday’s closing price as of close of trading on Wednesday.
The company did lower its full-year guidance ranges for adjusted EBITDA, operating EPS, and same-store sales expectations at both brands. Still, investors appear encouraged by Jack in the Box’s ongoing share buybacks, increased quarterly dividends, and initiatives to drive sales momentum. JACK’s market cap stands at approximately $1.085 billion.
During Q2, Jack in the Box repurchased 0.2 million shares for $15 million. Under the current buyback authorization, $210 million remains. The company declared a quarterly cash dividend of $0.44 per share, payable on June 25 to shareholders of record on June 6.
Should You Buy Jack in the Box Shares in 2024?
With Jack in the Box lowering its full-year guidance across key metrics like EBITDA, EPS and same-store sales, investors may approach the stock with caution in 2024. The 7.7% revenue decline and relatively flat earnings highlight the challenges facing the company as it franchises Del Taco locations.
However, Jack in the Box’s core brand demonstrated improved restaurant-level profitability at 23.6% in Q2. The ongoing share repurchase program and increased quarterly dividend could provide support. And with a large footprint of future locations in the development pipeline, expansion remains a potential growth driver. Also, the success of new product launches, value offerings and marketing aimed at regaining sales momentum will likely determine if Jack in the Box shares present an attractive buying opportunity this year.
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