8-K: Jack in the Box Q3 Sales Dip Amid Challenging Macro

Jack in the Box Inc. reported a decline in third-quarter same-store sales for both its Jack in the Box and Del Taco brands, attributing the dip to a challenging macro environment.

Summary

• Jack in the Box Inc. announced financial results for the third quarter ended July 6, 2025, reporting a challenging macro environment.
• Jack in the Box same-store sales decreased by 7.1%, with franchise sales down 7.2% and company-owned sales down 6.4%.
• Del Taco same-store sales decreased by 2.6%, with franchise sales down 2.7% and company-operated sales down 2.2%.
• Sales performance for both brands resulted from a decline in transactions and mix, partially offset by an increase in price.
• Total revenues decreased 9.8% to $333.0 million, down from $369.2 million in the prior year quarter, primarily due to lower sales and Del Taco refranchising.
• Diluted earnings per share was $1.15, a significant improvement from a net loss of $(6.26) in the prior year, largely due to a much lower goodwill and intangible impairment charge.
• Operating Earnings Per Share (non-GAAP) was $1.02, down from $1.65 in the prior year quarter.
• Adjusted EBITDA (non-GAAP) was $61.6 million, compared to $78.9 million for the prior year quarter.
• Jack in the Box net restaurant count decreased by 15 units (6 openings, 21 closures), with 13 closures related to the 'JACK on Track block closure program'.
• Del Taco net restaurant count decreased by 6 units (3 openings, 9 closings).
• The company did not repurchase any shares in the third quarter, with $175.0 million remaining under the stock buyback program.
• The company discontinued its dividend.
• Fiscal year 2025 guidance includes Capital Expenditures of $85 to $90 million, Adjusted EBITDA of $270 to $275 million, and Operating EPS of $4.55 to $4.73.

Sentiment

Score: 3

Explanation: The company reported significant declines in same-store sales, total revenue, operating EPS, and Adjusted EBITDA for the quarter. While management expressed confidence in future improvements and a strategic plan, the current financial performance is weak, and the dividend has been discontinued.

Positives

• Net earnings turned positive to $22.0 million in Q3 2025, compared to a net loss of $(122.3) million in Q3 2024, primarily due to a significantly lower goodwill and intangible impairment charge ($6.3 million vs. $162.6 million).
• Selling, general and administrative (SG&A) expense decreased by $2.7 million to $26.8 million, driven by fluctuations in company-owned life insurance policies and lower incentive-based compensation.
• Del Taco's Franchise-Level Margin remained stable at 27.0% (compared to 27.1% prior year), benefiting from refranchising, early termination fees, and lower IT costs.
• Management expressed confidence in improving performance in the fourth quarter and next fiscal year by focusing on innovation, value, and guest experience.

Negatives

• Jack in the Box same-store sales decreased significantly by 7.1% in the third quarter.
• Del Taco same-store sales also declined by 2.6% in the third quarter.
• Total revenues decreased by 9.8% to $333.0 million.
• Operating Earnings Per Share (non-GAAP) decreased to $1.02 from $1.65 in the prior year quarter.
• Adjusted EBITDA (non-GAAP) decreased to $61.6 million from $78.9 million in the prior year quarter.
• Jack in the Box Restaurant-Level Margin decreased to 17.9% from 21.0% due to lower sales, higher labor, commodity inflation, and increased utility costs.
• Del Taco Restaurant-Level Margin decreased to 9.7% from 13.4% due to refranchising, lower sales, and higher costs including utilities, labor, and commodity inflation.
• Jack in the Box net restaurant count decreased by 15 units, and Del Taco net restaurant count decreased by 6 units.
• The company discontinued its dividend, indicating a shift in capital allocation strategy away from shareholder returns via dividends.
• No shares were repurchased in the third quarter, despite a remaining $175.0 million authorization.

Risks

• The success of new products, marketing initiatives, and restaurant remodels and drive-thru enhancements is uncertain.
• Impact of competition, unemployment, trends in consumer spending patterns, and commodity costs could negatively affect performance.
• Ability to achieve and manage planned growth is affected by the availability of suitable new restaurant sites, performance of new restaurants, and successful franchise development.
• Challenges in attracting, training, and retaining top-performing personnel.
• Litigation risks and risks associated with disagreements with franchisees.
• Potential for supply chain disruption.
• Food-safety incidents or negative publicity could impact the company's brand reputation.
• Increased regulatory and legal complexities.
• Risks associated with the amount and terms of securitized debt issued by wholly-owned subsidiaries.
• Stock market volatility could affect the company's share price.

Future Outlook

The company's updated guidance for fiscal year ending September 28, 2025, includes capital expenditures of $85 to $90 million, total share repurchases of $5 million (all occurred in Q1 2025), SG&A of $155 to $160 million (including $5.5 million incremental marketing in Q4), Adjusted EBITDA of $270 to $275 million, and Operating EPS of $4.55 to $4.73. Jack in the Box segment expects negative lowto mid-single digit same-store sales, 30 to 35 gross restaurant openings, and company-owned restaurant level margin of 19% to 21%, factoring in AB1228 wage increases, higher utility costs, and low to mid-single digit commodity inflation.

Management Comments

• "While the macro environment remains challenging, Jack in the Box is poised to improve performance in the fourth quarter and into the next fiscal year by prioritizing area of immediate impact."
• "By leveraging innovation, offering craveable value and re-focusing on improving the overall guest experience, I'm confident in our ability to quickly regain momentum in the business."
• "I am pleased with our progress against the JACK on Track plan thus far and remain committed to simplifying our business model to drive shareholder value and support sustainable long-term growth."

Industry Context

The company explicitly states that the 'macro environment remains challenging,' indicating that the reported declines in same-store sales and profitability are occurring within a broader industry context of economic headwinds, likely impacting consumer discretionary spending and restaurant traffic in the Quick Service Restaurant (QSR) sector.

Comparison to Industry Standards

• The filing does not provide specific comparable companies, projects, or results to assess against global benchmarks.

Stakeholder Impact

• Shareholders: Impacted by declining operating EPS, the discontinuation of the dividend, and no share repurchases in the quarter, potentially leading to reduced returns and share price pressure.
• Employees: Company-owned restaurant employees, particularly in California, are affected by AB1228 wage increases, contributing to higher labor costs.
• Customers: The company plans to re-focus on improving the overall guest experience and offering 'craveable value' to regain momentum, suggesting potential changes in menu offerings or pricing strategies.
• Franchisees: Experience lower sales and royalties, impacting their profitability, though franchise lease buyouts partially offset some declines for the company.

Next Steps

• Focus on improving performance in the fourth quarter and into the next fiscal year.
• Prioritize areas of immediate impact by leveraging innovation, offering craveable value, and re-focusing on improving the overall guest experience.
• Continue progress against the 'JACK on Track' plan to simplify the business model, drive shareholder value, and support sustainable long-term growth.
• Host a conference call for analysts and investors on August 6, 2025, at 2:00 p.m. PT (5:00 p.m. ET).

Key Dates

Recommendation

The company reported substantial declines in same-store sales for both brands, a significant drop in operating EPS, and reduced Adjusted EBITDA. The discontinuation of the dividend and the net decrease in restaurant count further signal operational challenges. While management expresses confidence in a future turnaround via the 'JACK on Track' plan, the current quarter's performance indicates a deteriorating financial position in a challenging macro environment, warranting a 'sell' recommendation for investors seeking stronger performance and stability.

Keywords

Fast food, QSR, Restaurant, Jack in the Box, Del Taco, Earnings, Financial results, Same-store sales, NASDAQ: JACK, SEC filing, Quarterly report