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Jack in the Box Stock Gains on Alternative Strategic Plan

Jack in the Box Inc. JACK announced that it is exploring a range of strategic and financing alternatives. This hamburger restaurant chain, with more than 2,000 restaurants, is looking for options that may include the sale of the company. Following the news, the company’s shares gained 2.1% on Dec 17. However, the company’s shares have declined 19.2% in a year’s time, against the industry’s growth of 7.8%.

Nevertheless, the company further added that it has not set any deadline for the completion of this process. Although there is no certainty about any potential deal, the company has started to look for potential buyers. Notably, Jack in the Box sold its subsidiary Qdoba to Apollo Global Management APO in March 2018.

The Zacks Rank #5 (Strong Sell) company has been bearing the brunt of declining sales for quite some time now. Despite selling its Qdoba subsidiary, the company failed to overcome the hurdles of soft comps and operational inefficiencies.

 

In the fourth quarter of fiscal 2018, Jack in the Box witnessed its overall revenue decline 23.5% year over year. Moreover, the company announced that it began first-quarter fiscal 2019 on a disappointing note. Comps for the first seven weeks of the fiscal first quarter decreased 1-2% due to Ribeye Burger’s dismal performance. For fiscal 2019, the company anticipates comps to be in the range of flat to up 2%.

Further, the company is facing intense competition from high-end fast food chains. While several other restaurateurs, including McDonald’s MCD, have opened outlets in the emerging markets, Jack in the Box has a limited international presence. Moreover, the company is experiencing increased competitive pressure on breakfast and lunch day parts as many other restaurateurs have introduced aggressive value offers.

Key Pick

A better-ranked stock worth considering in the same space includes BJ's Restaurants, Inc. BJRI, carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

BJ's Restaurants has reported better-than-expected earnings in the trailing four quarters, recording positive average surprise of 33.2%.

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Apollo Global Management, LLC (APO) : Free Stock Analysis Report
 
BJ's Restaurants, Inc. (BJRI) : Free Stock Analysis Report
 
McDonald's Corporation (MCD) : Free Stock Analysis Report
 
Jack In The Box Inc. (JACK) : Free Stock Analysis Report
 
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