Jack in the Box (JACK) Q3 Earnings Lag Estimates, Revenues Top

Jack in the Box Inc. JACK reported mixed third-quarter fiscal 2022 results, with earnings missing the Zacks Consensus Estimate but revenues beating the same. The top line rose year over year, while the bottom line declined on a year-over-year basis. Revenues surpassed the consensus estimate for the second straight quarter. Following the results, the company’s shares rose 7.4% during the trading hours on Aug 10.

Let’s take a closer look at the numbers.

Earnings & Revenues Details

During the fiscal third quarter, adjusted earnings from continuing operations came in at $1.38 per share. The figure missed the Zacks Consensus Estimate of $1.43. The metric dropped 15.9% from $1.64 reported in the prior-year quarter.

Quarterly revenues of $398.3 million beat the Zacks Consensus Estimate of $394 million by 1.1%. The top line rallied 47.8% on a year-over-year basis. Franchise rental revenues fell 0.7% year over year to $80.1 million. Franchise royalties and other revenues increased 7.2% year over year to $52.1 million. Franchise contributions to advertising and other services revenues inched up 5.3% year over year to $50.9 million. Company restaurant sales increased to $215.2 million from $91.9 million reported in the prior-year quarter.

Comps Discussion

In the quarter under review, comps at Jack in the Box’s stores increased 3.5% year over year compared with 9% 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% year over year against 10.3% growth reported in the prior-year quarter. System-wide same-store sales fell 0.6% year over year against a 10.2% gain reported in the year-ago quarter.

Del Taco Performance

During third-quarter 2022, same-store sales rose 3.5%, comprising of franchise same-store sales growth of 4.8% and company-operated same-store sales growth of 2.3%. During the quarter, the company closed five restaurants.

Operating Highlights

During the fiscal third quarter, restaurant-level adjusted margin came in at 15.8% compared with 25.4% reported in the prior-year quarter. The downside was driven by a rise in food and packaging costs, wage inflation of 13.2% and higher utilities and maintenance and repair costs.

Food and packaging costs (as a percentage of company restaurant sales) rose 120 bps year over year to 30.6%. Commodity costs during the quarter increased 16.8% year over year. The upside can be attributed to a rise in the price of proteins, sauces, oil and beverages.

The franchise level margin was 41.4% in the fiscal third quarter compared with 43.3% reported in the prior-year quarter.

During the quarter, selling, general and administrative expenses accounted for 10.1% of total revenues compared with 8.1% in the prior-year quarter.

Balance Sheet

As of July 10, 2022, cash totaled $65.9 million compared with $55.3 million as of Oct 3, 2021. Inventories during the quarter came in at $5.7 million compared with $2.3 million as of Oct 3, 2021. Long-term debt (net of current maturities) totaled $1,806.1 million as of Jul 10, 2022 compared with $1,273.4 million at the end of Oct 3, 2021.

During the fiscal third quarter, the company did not repurchase any shares but plans to complete $25 million in share repurchases during the fourth quarter of fiscal 2022.

The company declared a cash dividend of 44 cents per share. The dividend will be paid out on Sep 9, 2022, to shareholders on record as of Aug 24, 2022.

Fiscal 2022 Outlook

Company-wide CapEx and Other Investments (including Del Taco) in fiscal 2022 are expected in the range of $50-55 million compared with the earlier estimate of $75-80 million. Overall Restaurant Level Margin in fiscal 2022 is anticipated to be approximately 16% compared with the prior estimate of nearly 17%.

Jack in the Box currently has a Zacks Rank #3 (Hold).

Key Picks

Some better-ranked stocks in the Zacks Retail-Wholesale sector are Potbelly Corporation PBPB, Arcos Dorados Holdings Inc. ARCO and Dollar Tree Inc. DLTR.

Potbelly has a Zacks Rank #2 (Buy), at present. PBPB has a trailing four-quarter earnings surprise of 26.2%, on average. Shares of PBPB have declined 25% in the past year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Potbelly’s 2022 sales and EPS suggests growth of 14.1% and 90.4%, respectively, from the corresponding year-ago period’s levels.

Arcos Dorados carries a Zacks Rank #2. ARCO has a long-term earnings growth of 34.4%. Shares of the company have increased 40.2% in the past year.

The Zacks Consensus Estimate for Arcos Dorados’ 2022 sales and EPS suggests growth of 25.7% and 120.8%, respectively, from the year-ago period’s levels.

Dollar Tree carries a Zacks Rank #2. DLTR has a trailing four-quarter earnings surprise of 13.1%, on average. The stock has gained 62.3% in the past year.

The Zacks Consensus Estimate for Dollar Tree’s 2022 sales and EPS suggests growth of 6.7% and 40.5%, respectively, from the corresponding year-ago period’s levels.

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