8-K: Jack in the Box Inc. Reports Mixed Q1 2024 Results: Same-Store Sales Up, Earnings Down

Jack in the Box Inc. announced its first quarter fiscal 2024 results, showing positive same-store sales growth for both Jack in the Box and Del Taco brands, but a decrease in overall revenue and earnings.

Summary

• Jack in the Box Inc. reported its financial results for the first quarter of fiscal year 2024, which ended on January 21, 2024.
• Jack in the Box same-store sales increased by 0.8%, with franchise locations growing by 0.7% and company-owned stores by 2.0%.
• Del Taco same-store sales saw a 2.2% increase, with franchise locations up 2.4% and company-operated stores up 1.8%.
• Systemwide sales for Jack in the Box grew by 1.8%, while Del Taco's systemwide sales increased by 0.1%.
• Jack in the Box restaurant-level margin was 23.1%, up from 19.8% the previous year, driven by commodity deflation and sales leverage.
• Franchise-level margin for Jack in the Box decreased to 41.2% from 44.4% due to the absence of a prior year royalty buyout.
• Del Taco's restaurant-level margin decreased to 15.6% from 16.1%, impacted by wage and utility inflation.
• Diluted earnings per share were $1.93, and operating earnings per share were $1.95, compared to $2.01 in the prior year quarter.
• Total revenues decreased by 7.5% to $487.5 million, primarily due to Del Taco refranchising efforts.
• Net earnings decreased to $38.7 million from $53.3 million in the same quarter last year.
• Adjusted EBITDA was $101.8 million, down from $108.6 million in the prior year quarter.
• The company repurchased 0.3 million shares of common stock for $25.2 million during the quarter.
• A cash dividend of $0.44 per share was declared, payable on March 27, 2024.

Sentiment

Score: 5

Explanation: The sentiment is neutral to slightly negative. While there are positive aspects like same-store sales growth and expansion, the decrease in overall revenue, earnings, and EBITDA, along with margin pressures, temper the positive news. The company is facing challenges that need to be addressed.

Positives

• Both Jack in the Box and Del Taco brands experienced positive same-store sales growth.
• Jack in the Box restaurant-level margin saw a significant increase, driven by commodity deflation and sales leverage.
• The company is expanding into new markets with new franchise agreements in Florida and Michigan.
• The successful launch of the Smashed Jack burger indicates strong product innovation.
• Jack in the Box increased its net restaurant count by six.
• Company-wide SG&A expenses decreased compared to the prior year quarter.
• The company continues to return capital to shareholders through share repurchases and dividends.

Negatives

• Total revenues decreased by 7.5% compared to the prior year quarter, primarily due to Del Taco refranchising.
• Net earnings decreased to $38.7 million from $53.3 million in the same quarter last year.
• Adjusted EBITDA decreased to $101.8 million from $108.6 million in the prior year quarter.
• Del Taco's restaurant-level margin decreased due to wage and utility inflation.
• Jack in the Box franchise-level margin decreased due to the absence of a prior year royalty buyout.
• Del Taco systemwide sales growth was only 0.1%, negatively impacted by a calendar shift and a temporary restaurant closure.

Risks

• The company faces risks related to the success of new products and marketing initiatives.
• Competition, unemployment, and consumer spending patterns could impact results.
• The company's growth plans are subject to the availability of suitable new restaurant sites and successful franchise development.
• Supply chain disruptions and food safety incidents could negatively impact the company.
• The company is exposed to litigation risks and disagreements with franchisees.
• Stock market volatility could affect the company's valuation.

Future Outlook

All guidance and outlook provided on November 21, 2023, for the fiscal year ending September 29, 2024, remain the same as previously disclosed.

Management Comments

• Darin Harris, Jack in the Box Chief Executive Officer, stated that the first quarter included notable progress on the company's long-term strategy and objectives.
• He also expressed pleasure with the sales rebound for Del Taco, the outperformance of Jack in the Box restaurant level margin, and the completion of development agreements with new franchisees.

Industry Context

The results reflect the ongoing challenges and opportunities in the quick-service restaurant industry, including managing costs, driving sales, and expanding market presence. The company's focus on franchise development and new product launches aligns with industry trends aimed at growth and profitability.

Comparison to Industry Standards

• Jack in the Box's same-store sales growth of 0.8% is below the industry average for QSRs, which has seen growth closer to 2-3% in recent quarters, with some top performers exceeding 5%.
• Del Taco's same-store sales growth of 2.2% is more in line with industry averages, but still lags behind some of the top performing Mexican-American QSR chains.
• The restaurant-level margin for Jack in the Box at 23.1% is competitive, but companies like McDonald's and Chick-fil-A often report margins in the high 20s or low 30s.
• Del Taco's restaurant-level margin of 15.6% is below the industry average, indicating potential challenges in cost management.
• The refranchising efforts, while impacting revenue, are a common strategy in the QSR industry to reduce capital expenditure and focus on brand management, similar to moves by Burger King and Wendy's.
• The expansion into new markets like Florida and Michigan is a positive step, but the success will depend on the company's ability to compete with established players in those regions, such as Taco Bell and local chains.

Stakeholder Impact

• Shareholders may be concerned about the decrease in earnings and adjusted EBITDA.
• Employees may be impacted by changes in restaurant operations and expansion efforts.
• Customers may benefit from new menu items and restaurant locations.
• Franchisees will be impacted by the company's expansion and development plans.
• Suppliers may see changes in demand based on the company's performance.

Next Steps

• The company will continue to focus on its long-term strategy and objectives.
• The company will continue to expand into new markets with new franchise agreements.
• The company will continue to monitor and manage costs to improve margins.
• The company will continue to evaluate and optimize its menu offerings.

Key Dates

Keywords

Jack in the Box, Del Taco, same-store sales, restaurant-level margin, franchise, earnings, EBITDA, refranchising, systemwide sales, development agreements