Here's Why You Should Retain Jack in the Box (JACK) Stock
Jack in the Box Inc. JACK will likely benefit from menu innovation, digital initiatives and expansion efforts. Also, the focus on the franchise development program bodes well. However, commodity and wage inflation are a concern.
Let us discuss the factors that highlight why investors should retain the stock now.
Growth Catalysts
The company focuses on menu innovation to drive growth. In fourth-quarter fiscal 2023, the company reported solid sales concerning the Double Bacon Sourdough Jack, Sauced and Loaded Potato Wedges, a Breakfast Taco, updated combinations of the Fan Favs Box and the addition of three new Iced Creamaccinos.
Given the menu diversity, price points and positive customer feedback, the company remains flexible and resilient against a shift in customer behavior. Going forward, JACK intends to focus on innovation plus beverage and snack attachment to support the hook-and-build strategy. This and the emphasis on value messaging are likely to drive frequency in the upcoming periods.
Jack in the Box is prioritizing its digital platforms to elevate overall guest experiences and customer satisfaction. As of the fourth quarter of fiscal 2023, JACK's digital sales represent a substantial portion, contributing 12% to total sales. Digital carryout sustained its momentum, surpassing growth of digital delivery for three consecutive quarters. First-party channels like app and web ordering have demonstrated a 36% increase year over year, surpassing third-party channels.
The company has reported advancements regarding the implementation of a new point-of-sale (POS) provider, targeting system-wide completion by the end of fiscal 2025. The revamp of the restaurant technology infrastructure is anticipated to generate cost efficiencies, bolster back-office systems, facilitate automation and play a pivotal role in achieving its digital objectives. This technology is viewed as the core for introducing applications that significantly elevate the guest experience, thereby driving increased sales and profitability.
The company continues to focus on repairing its franchisee relationship, mapping markets and rebuilding its store pipeline to drive growth. Ever since the launch of the development program (in mid-2021), the company signed 90 agreements for a total of 389 restaurants, of which 38 have opened and 351 are in place for future development. This includes market entry into Mexico, Florida, Arkansas, Montana and Wyoming. During the fiscal fourth quarter, the company unveiled its restaurant in Louisville and reported solid sales.
The company reported 77 restaurants in the design, permitting and construction phases and anticipates 25-35 restaurant openings in the fiscal 2024. Given the substantial progress in terms of the franchise development program, the company anticipates achieving a long-term net unit growth goal of 4% by 2025. Also, it expects to have Jack in the Box restaurants in 40 states by 2030.
Concerns
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In the past six months, Jack in the Box’s shares have declined 10.6% compared with the industry’s 3.4% fall. The downside was mainly caused by commodity and wage inflation.
Commodity costs during the fiscal third quarter and fiscal year 2023 increased 3.4% and 8.4%, respectively, year over year. The upside can be attributed to a rise in the price across nearly all categories, with the major impact seen in sauces, potatoes, beverages and produce. The company stated concerns about a challenging inflationary environment in 2024. For fiscal 2024, the company expects commodity cost inflation to be up 1% to 3% from 2023 levels.
Zacks Rank & Key Picks
Jack in the Box currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Retail-Wholesale sector include:
Arcos Dorados Holdings Inc. ARCO sports a Zacks Rank #1 (Strong Buy). The company has a trailing four-quarter earnings surprise of 28.3% on average. Shares of ARCO have increased by 66.9% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for ARCO’s 2024 sales and earnings per share (EPS) indicates 10.6% and 15.5% growth, respectively, from the year-ago period’s levels.
Brinker International, Inc. EAT sports a Zacks Rank #1. It has a trailing four-quarter earnings surprise of 223.6%, on average. Shares of EAT have increased 18.6% in the past year.
The Zacks Consensus Estimate for EAT’s 2024 sales and EPS indicates a 5.1% and a 26.2% growth, respectively, from the year-ago period’s levels.
Wingstop Inc. WING sports a Zacks Rank #1. It has a trailing four-quarter earnings surprise of 28.9%, on average. The stock has gained 61.9% in the past year.
The Zacks Consensus Estimate for Wingstop’s 2024 sales and EPS suggests rises of 15.6% and 17.5%, respectively, from the year-ago period’s levels.
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