10-Q: Jack in the Box Inc. Reports Mixed Q1 2025 Results Amid Refranchising Efforts

Jack in the Box Inc. reports a decrease in overall revenue for Q1 2025, impacted by refranchising and mixed same-store sales performance across its Jack in the Box and Del Taco brands.

Summary

• Jack in the Box Inc. reported total revenues of $469.4 million for the sixteen weeks ended January 19, 2025, compared to $487.5 million for the same period in the prior year.
• Company restaurant sales were $201.4 million, down from $224.0 million in the prior year.
• Same-store sales for Jack in the Box system restaurants increased by 0.4%, while Del Taco system restaurants decreased by 4.5%.
• The company refranchised 13 Del Taco restaurants during the quarter.
• Net earnings were $33.7 million, or $1.75 per diluted share, compared to $38.7 million, or $1.93 per diluted share, in the prior year.
• The company repurchased 0.1 million shares of its common stock for $5.0 million.
• The Board of Directors declared a cash dividend of $0.44 per common share.

Sentiment

Score: 5

Explanation: The report presents mixed results, with some positive aspects offset by declines in revenue and earnings. The refranchising strategy is impacting sales, and the company faces ongoing challenges related to labor costs and competition.

Positives

• Jack in the Box system same-store sales showed a slight increase of 0.4%.
• The company recognized a net gain of $2.8 million on the sale of 13 company-operated restaurants.
• The company continues to return capital to shareholders through dividends and share repurchases.
• Jack in the Box company restaurant sales increased by 1.3%.

Negatives

• Total revenues decreased to $469.4 million from $487.5 million year-over-year.
• Del Taco system same-store sales decreased by 4.5%.
• Del Taco company restaurant sales decreased significantly by 26.5% due to refranchising.
• Net earnings decreased to $33.7 million, or $1.75 per diluted share.

Risks

• Changes in the availability and cost of labor could adversely affect the business.
• Increases in food and commodity costs could decrease profit margins.
• Failure to receive scheduled deliveries of high-quality food ingredients and other supplies could harm operations and reputation.
• The company faces significant competition in the food service industry.
• The company may be adversely impacted by severe weather conditions, natural disasters, terrorist acts or civil unrest.
• Food safety and food-borne illness concerns may have an adverse effect on the business.
• The company's business and Del Taco's business may not be integrated successfully, or such integration may be more difficult, time consuming, or costly than expected.
• The company is subject to the risk of cybersecurity breaches, intrusions, data loss, or other data security incidents.

Future Outlook

Based upon current levels of operations and anticipated growth, the company expects that cash flows from operations, combined with its securitized financing facility and revolving credit facility, will be sufficient to meet its capital expenditure, working capital and debt service requirements for at least the next twelve months and the foreseeable future.

Industry Context

The restaurant industry is highly competitive, and Jack in the Box faces competition from other quick-service restaurants and changing consumer preferences.

Comparison to Industry Standards

• Comparable companies in the quick-service restaurant industry include McDonald's, Wendy's, and Burger King.
• Same-store sales growth is a key metric for evaluating performance in the restaurant industry.
• The company's performance should be assessed in the context of broader economic trends and consumer spending patterns.

Legal Proceedings

• The company is involved in ongoing litigation, including Gessele v. Jack in the Box Inc. and J&D Restaurant Group.
• As of January 19, 2025, the Company had accruals of $17.5 million for all of its legal matters in aggregate, presented within Accrued liabilities on our condensed consolidated balance sheet.

Stakeholder Impact

• Shareholders will receive a cash dividend of $0.44 per common share.
• Franchisees are impacted by the refranchising strategy and changes in franchise support costs.
• Employees are affected by changes in labor costs and potential unionization activities.

Next Steps

• The company will continue to assess the optimal sources and uses of cash for its business.
• The company will review its balance sheet for any undervalued assets and pursue opportunities for capital sources, including the sale of its owned Jack in the Box properties and refranchising, primarily for Del Taco in the near term.
• The company will continue to evaluate contributions to its Qualified Plan based on changes in pension assets as a result of asset performance in the current market and the economic environment.

Key Dates