Jack in the Box(US:JACK)2025-05-14 22:02Financial Data and Key Metrics Changes - Second quarter same store sales decreased by 4.4%, with franchise restaurant comp down 4.5% and company-owned sales down 4% [12][14] - Consolidated adjusted EBITDA was $66.5 million, down from $75.7 million in the prior year, primarily due to Del Taco refranchising and sales deleverage [19] - The company reported a consolidated GAAP diluted loss per share of negative $7.47 compared to diluted earnings per share of $1.26 in the prior year [19] Business Line Data and Key Metrics Changes - Jack brand's restaurant level margin percentage decreased to 19.6% from 23.6% a year ago, driven by lower sales and inflation [14] - Del Taco's system same store sales declined 3.6%, with franchise sales down 4.2% and company-owned comp down 1.7% [15][16] - Del Taco restaurant level margin was 12.8%, down 400 basis points from the prior year, primarily due to lower sales and inflation [17] Market Data and Key Metrics Changes - Digital sales now account for 18% of system-wide sales, aided by the implementation of kiosks and mobile ordering [9][16] - The company experienced a decline in transactions across both brands, impacting overall sales performance [12][15] Company Strategy and Development Direction - The company is focused on becoming a simpler, asset-light organization to drive sustainable growth for franchisees and investors [6] - The "Jack on Track" plan aims to strengthen the balance sheet, accelerate cash flow, and close underperforming restaurants [11] - The company is committed to technology modernization, including the rollout of a new point of sale system [9][10] Management's Comments on Operating Environment and Future Outlook - Management acknowledged significant pressure on multiple income cohorts, leading to negative traffic [8] - The company remains focused on driving same store sales as a top priority despite current challenges [9] - Management expressed optimism about the long-term transformation and growth potential of the company [6][11] Other Important Information - The company recorded a non-cash goodwill and intangible asset impairment of $203.2 million for the Del Taco reporting unit [19] - Capital expenditures for the quarter were $21.5 million, focusing on technology and digital initiatives [20] Q&A Session Summary Question: Current trends at Jack relative to the down 4.4% in Q2 - Management indicated that trends in Q3 are in line with Q2, facing a challenging industry environment [25][26] Question: Comp pressure driven by company-specific headwinds - Management noted IT issues impacting 1% to 2% in same store sales and highlighted the over-indexing on low-income consumers [30][31] Question: Key priorities for Del Taco during strategic alternatives exploration - Management emphasized the need for operational execution and revamping marketing strategies [36][38] Question: Allowance for doubtful accounts and potential bad debt expense - Management clarified that the increase is related to a specific franchise matter and does not anticipate an impact from the closure program [41] Question: Value positioning in the current environment - Management discussed the importance of perceived value and satisfaction rather than just low prices [45][46] Question: Conversations with franchisees post Jack on Track rollout - Management reported positive feedback from franchisees, who are supportive of long-term changes [50][51] Question: Geographic concentration of closures - Management stated that closures will be spread throughout the system, focusing on economic factors [55][56] Question: Strategic alternatives for Del Taco - Management indicated significant interest in the brand and is exploring various options, including potential divestiture [62][63] Question: Update on new unit development commitments - Management expressed excitement about new unit growth and ongoing developments in various markets [67][68] Question: Performance across different dayparts - Management noted even pressure across lunch and dinner, with some successful promotions [70][72]