8-K: Jack in the Box Inc. Reports Mixed First Quarter 2025 Earnings; Del Taco Sales Decline

Jack in the Box Inc. announced its first quarter fiscal 2025 financial results, highlighting growth in Jack in the Box same-store sales but a decline in Del Taco same-store sales.

Summary

• Jack in the Box Inc. reported its first quarter fiscal 2025 financial results on February 25, 2025.
• Jack in the Box same-store sales increased by 0.4%, while Del Taco same-store sales decreased by 4.5%.
• Diluted earnings per share were $1.75, and operating EPS was $1.92.
• Total revenues decreased by 3.7% to $469.4 million, primarily due to Del Taco refranchising transactions.
• Net income was $33.7 million, compared to $38.7 million in the prior year quarter.
• Adjusted EBITDA was $97.2 million, compared to $101.8 million in the prior year quarter.
• The company repurchased 0.1 million shares of common stock for $5.0 million.
• A cash dividend of $0.44 per share was declared, payable on April 8, 2025.
• Capital expenditure guidance was revised to $100-$105 million, and share repurchases are expected to be approximately $5 million for fiscal year 2025.

Sentiment

Score: 5

Explanation: The sentiment is neutral. While Jack in the Box showed some positive performance, Del Taco's decline and overall revenue decrease temper the outlook. The company is facing challenges but is taking steps to address them.

Positives

• Jack in the Box same-store sales showed a slight increase of 0.4%.
• Restaurant-Level Margin for Jack in the Box improved to 23.2% due to lower food and packaging costs.
• The company signed 3 development agreements with new franchisees for 10 new Jack in the Box restaurants.
• Jack in the Box completed development agreements for 2 new franchisees to expand in Chicago, in addition to the 8 company-owned restaurants set to begin opening in Summer of 2025.
• The company repurchased shares and declared a cash dividend.

Negatives

• Del Taco same-store sales decreased by 4.5%.
• Total revenues decreased by 3.7% to $469.4 million.
• Net income decreased to $33.7 million from $38.7 million in the prior year quarter.
• Adjusted EBITDA decreased to $97.2 million from $101.8 million in the prior year quarter.
• Jack in the Box net restaurant count decreased slightly in the first quarter, with five restaurant openings and six restaurant closures.

Risks

• The company faces a difficult industry-wide macro environment.
• Del Taco's refranchising transactions are impacting revenue.
• Increased labor costs, particularly due to California's minimum wage law, are affecting margins.
• The company's ability to regain sales momentum is uncertain.

Future Outlook

The company expects capital expenditures of $100-$105 million and share repurchases of approximately $5 million for fiscal year 2025.

Management Comments

• Lance Tucker, Jack in the Box Interim Principal Executive Officer, stated that the first quarter saw a good start to top-line performance and bottom-line earnings flow through despite a difficult industry-wide macro environment.
• Lance Tucker mentioned he will be assessing capital allocation, investments, and leverage reduction while executing on fundamentals to regain sales momentum.

Industry Context

The report acknowledges a difficult industry-wide macro environment, suggesting that other restaurant chains may be facing similar challenges related to consumer spending, commodity costs, and labor expenses.

Comparison to Industry Standards

• It is difficult to compare Jack in the Box's performance directly to industry standards without knowing the specific metrics of its direct competitors.
• Companies like McDonald's, Wendy's, and Taco Bell could be considered peers, but their financial reporting may differ.
• The same-store sales growth of 0.4% for Jack in the Box should be compared to the average same-store sales growth of quick-service restaurants (QSRs) during the same period.
• Del Taco's negative same-store sales of -4.5% should be benchmarked against other Mexican-American QSR chains.

Management Changes

Stakeholder Impact

• Shareholders will receive a cash dividend of $0.44 per share.
• Franchisees may be impacted by changes in franchise-level margins and development agreements.
• Employees may be affected by increased labor costs and operational changes.
• Customers may experience changes related to menu pricing and restaurant remodels.

Next Steps

• The company will continue to focus on tech and digital transformation, with nearly 1,000 restaurants on the new POS system.
• Management will assess capital allocation, investments, and leverage reduction.
• The company will execute on fundamentals to regain sales momentum as it moves through 2025.

Key Dates