Jack in the Box (JACK) Q2 Earnings Lag Estimates, Revenues Top

Jack in the Box Inc. JACK reported mixed second-quarter fiscal 2022 results, with earnings missing the Zacks Consensus Estimate and revenues beating the same. The top line rose year over year, while the bottom line declined on a year-over-year basis. Following the results, the company’s shares dropped 2.9% during trading hours on May 26.

Let’s take a closer look at the numbers.

Earnings & Revenue Details

During the fiscal second quarter, adjusted earnings from continuing operations came in at $1.16 per share. The figure missed the Zacks Consensus Estimate of $1.35. Also, the metric dropped 17.1% from $1.40 reported in the prior-year quarter.

Quarterly revenues of $322.3 million beat the Zacks Consensus Estimate of $262 million by 23.1%. The top line rallied 25.3% on a year-over-year basis. Franchise rental revenues fell 1.7% year over year to $76.6 million. Franchise royalties and other revenues dropped 0.3% year over year to $47.1 million. Franchise contributions to advertising and other services revenues inched up 2.6% year over year to $47.3 million. Company restaurant sales increased to $151.3 million from $86 million reported in the prior-year quarter.

Comps Discussion

In the quarter under review, comps at Jack in the Box’s stores increased 1.7% year over year compared with 14.5% growth reported in the prior-year quarter. The upside in comps was primarily due to an increase in average checks partially offset by a decline in traffic.

Same-store sales at franchised stores fell 1.1% year over year against 21.3% growth reported in the prior-year quarter. System-wide same-store sales fell 0.8% year over year against a 20.6% gain reported in the year-ago quarter. The downside was primarily driven by staffing challenges, Omicron-induced headwinds (during final weeks) and lapping of stimulus benefits from the prior-year period.

Del Taco Performance

On Mar 8, 2022, the company completed the previously announced acquisition of Del Taco. The company has reported Del Taco system-wide and same-store sales performance based on its fiscal Q2 2022 calendar (Jan 24 through Apr 17).

On a pro-forma basis (as of Apr 17, 2022), the brand’s same-store sales increased 2.5% year over year. Franchise and company-operated same-store sales reflected growth of 3.4% and 1.6%, year over year, respectively. The upside was primarily driven by strong LTO performance and higher average ticket and menu price, partially offset by menu mix and transaction trends.

Operating Highlights

During the fiscal second quarter, restaurant-level adjusted margin came in at 15% compared with 25.9% reported in the prior-year quarter. The downside was driven by a rise in food and packaging costs, wage inflation of 14.2% and higher utilities and maintenance and repair costs.

Food and packaging costs (as a percentage of company restaurant sales) rose 320 bps year over year to 31%. Commodity costs during the quarter increased 16.4% year over year. The upside can be attributed to a rise in the price of beef, pork, sauces and oil.

The franchise level margin was 39.4% in the fiscal second quarter compared with 42% reported in the prior-year quarter.

During the quarter, selling, general and administrative expenses accounted for 8.8% of total revenues compared with 7.3% in the prior-year quarter.

Balance Sheet

As of Apr 17, 2022, cash (and restricted cash) totaled $84.6 million compared with $73.6 million as of Oct 3, 2021. Inventories during the quarter came in at $5.8 million compared with $2.3 million as of Oct 3, 2021. Long-term debt (net of current maturities) totaled $1,812.6 million as of Apr 17, 2022, compared with $1,273.4 million at the end of Oct 3, 2021.

During the fiscal second quarter, the company did not repurchase any shares. On Nov 19, 2021, the company’s board of directors announced an additional $200.0 million stock buyback program that expires on Nov 20, 2023. The company intends to resume share buyback during the second half of 2022.

The company declared a cash dividend of 44 cents per share. The dividend will be paid out on Jun 22, 2022, to shareholders on record as of Jun 7, 2022.

Fiscal 2022 Outlook

For fiscal 2022, the company expects system same-store sales growth to be flat to positive 1%, while Del Taco same-store sales are expected to grow in the range of 3-4%.

Company-wide CapEx and Other Investments (including Del Taco) in fiscal 2022 is expected in the range of $75-80 million. SG&A expenses are estimated at approximately $120-130 million.

For fiscal 2022, labor cost inflation is estimated in the range of 12-13%, while commodity cost inflation is expected to be between 12-14%. Overall Restaurant Level Margin in fiscal 2022 is anticipated to be approximately 17%.

Company-wide operating earnings per share (EPS) for fiscal 2022 are expected in the range of $5.80 to $6.10.

Zacks Rank & Key Picks

Jack in the Box currently has a Zacks Rank #4 (Sell).

Some better-ranked stocks in the Zacks Retail-Wholesale sector are MarineMax, Inc. HZO, BBQ Holdings, Inc. BBQ and Cracker Barrel Old Country Store CBRL.

MarineMax sports a Zacks Rank #1 (Strong Buy). The company has a trailing four-quarter earnings surprise of 32.8%, on average. Shares of the company have declined 19.1% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for MarineMax’s 2022 sales and EPS suggests growth of 16% and 21.5%, respectively, from the year-ago period’s levels.

BBQ Holdings carries a Zacks Rank #2 (Buy). BBQ Holdings has a long-term earnings growth of 14%. Shares of the company have decreased 11.7% in the past year.

The Zacks Consensus Estimate for BBQ Holdings’ 2022 sales and EPS suggests growth of 46.1% and 67.6%, respectively, from the year-ago period’s levels.

Cracker Barrel carries a Zacks Rank #2. Cracker Barrel has a long-term earnings growth of 9.4%. Shares of the company have declined 34.8% in the past year.

The Zacks Consensus Estimate for Cracker Barrel’s 2022 sales and EPS suggests growth of 17.3% and 33.5%, respectively, from the year-ago period’s levels.

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