Jack in the Box (NASDAQ:JACK) Reports Q4 In Line With Expectations
Fast-food chain Jack in the Box (NASDAQ:JACK) reported results in line with analysts' expectations in Q4 FY2023, with revenue down 7.5% year on year to $372.5 million. Turning to EPS, Jack in the Box made a GAAP profit of $1.08 per share, down from its profit of $2.17 per share in the same quarter last year.
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Jack in the Box (JACK) Q4 FY2023 Highlights:
Revenue: $372.5 million vs analyst estimates of $372.4 million (small beat)
EPS: $1.08 vs analyst expectations of $1.17 (7.5% miss)
Gross Margin (GAAP): 27.7%, down from 28.3% in the same quarter last year
Same-Store Sales were up 3.9% year on year
Store Locations: 2,186 at quarter end, increasing by 5 over the last 12 months
“We achieved several important milestones for our business in 2023 including positive unit growth, successful new market openings, accelerated Del Taco refranchising, strong same stores sales performance and improvements in restaurant-level profitability,” said Darin Harris, Jack in the Box Chief Executive Officer.
Delighting customers since its inception in 1951, Jack in the Box (NASDAQ:JACK) is a distinctive fast-food chain known for its bold flavors, innovative menu items, and quirky marketing.
Traditional Fast Food
Traditional fast-food restaurants are renowned for their speed and convenience, boasting menus filled with familiar and budget-friendly items. Their reputations for on-the-go consumption make them favored destinations for individuals and families needing a quick meal. This class of restaurants, however, is fighting the perception that their meals are unhealthy and made with inferior ingredients, a battle that's especially relevant today given the consumers increasing focus on health and wellness.
Sales Growth
Jack in the Box is larger than most restaurant chains and benefits from economies of scale, giving it an edge over its smaller competitors.
As you can see below, the company's annualized revenue growth rate of 15.5% over the last four years (we compare to 2019 to normalize for COVID-19 impacts) was excellent despite not opening many new restaurants, implying that growth was driven by increased sales at existing, established dining locations.
This quarter, Jack in the Box reported a rather uninspiring 7.5% year-on-year revenue decline, in line with Wall Street's estimates. Looking ahead, Wall Street expects revenue to decline 5.5% over the next 12 months.
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Number of Stores
A restaurant chain's total number of dining locations is a crucial factor influencing how much it can sell and how quickly company-level sales can grow.
When a chain like Jack in the Box is shuttering restaurants, it usually means that demand for its meals is waning, and the company is responding by closing underperforming locations to improve profitability. At the end of this quarter, Jack in the Box operated 2,186 total locations, in line with its restaurant count 12 months ago.
Taking a step back, Jack in the Box has kept its locations more or less flat over the last two years compared to other restaurant businesses. A smaller restaurant base means Jack in the Box must rely on higher foot traffic, larger order sizes, or price increases at existing restaurants to fuel revenue growth.
Same-Store Sales
A company's same-store sales growth shows the year-on-year change in sales for its restaurants that have been open for at least a year, give or take. This is a key performance indicator because it measures organic growth and demand.
Jack in the Box's demand within its existing restaurants has generally risen over the last two years but lagged behind the broader sector. On average, the company's same-store sales have grown by 4.1% year on year. Given its flat restaurant base over the same period, this performance stems from increased foot traffic or larger order sizes per customer at existing locations.
In the latest quarter, Jack in the Box's same-store sales rose 3.9% year on year. This growth was in line with the 4% year-on-year increase it posted 12 months ago.
Key Takeaways from Jack in the Box's Q4 Results
Sporting a market capitalization of $1.38 billion, Jack in the Box is among smaller companies, but its more than $185.9 million in cash on hand and positive free cash flow over the last 12 months puts it in an attractive position to invest in growth.
Despite declining year on year, we enjoyed seeing Jack in the Box beat analysts' gross margin expectations this quarter. That stood out as a positive in these results. On the other hand, its EPS missed Wall Street's estimates, driven by looser cost controls and lower-than-expected same-store sales at its flagship Jack in the Box restaurants and Del Taco, and its full-year earnings and adjusted EBITDA forecast underwhelmed. Overall, the results could have been better. The stock is flat after reporting and currently trades at $68.89 per share.
So should you invest in Jack in the Box right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
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The author has no position in any of the stocks mentioned in this report.
