Jack in the Box(JACK) - 2026 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The first quarter same-store sales for Jack in the Box decreased by 6.7%, with franchise restaurant same-store sales down 7% and company-owned same-store sales down 4.7% [16] - Jack's restaurant level margin percentage decreased to 16.1%, down from 23.2% in the prior year [16] - Earnings from continuing operations were $14.4 million for Q1 2026, compared to $31 million in the same quarter of the prior year [20] - GAAP diluted earnings per share from continuing operations was $0.75, down from $1.61 in the same period of the prior year [21] - Consolidated adjusted EBITDA was $68.2 million, down from $88.8 million in the prior year [21] Business Line Data and Key Metrics Changes - Franchise level margin was $84.1 million or 38.6% of franchise revenues, compared to $97.1 million or 40.9% a year ago [18] - There were 6 restaurant openings and 14 closures in the quarter, indicating a net decrease in restaurant count [18] Market Data and Key Metrics Changes - Food and packaging costs as a percentage of sales were 29.7%, increasing 380 basis points from the prior year due to commodity inflation of 7.1% [17] - Labor costs as a percentage of sales were 35.3%, increasing 200 basis points from the prior year, primarily due to a change in the mix of restaurants [17] Company Strategy and Development Direction - The company is focused on simplifying the business and reducing debt, having made a significant paydown of $105 million on its debt during the quarter [5][24] - The Jack on Track plan aims to bolster long-term financial performance by strengthening the balance sheet and positioning the company for sustainable growth [22] - The company is modernizing its restaurants with cost-effective refreshes that improve curb appeal, generating modest sales lifts [12] Management's Comments on Operating Environment and Future Outlook - Management noted that Q1 results were choppy but broadly in line with expectations, with improvements expected as the year progresses [7] - The company anticipates steady improvement on the top line as it moves through 2026, focusing on fundamentals essential for sustainable growth [9] - Management expressed confidence in the actions being taken to strengthen the business and improve profitability [15] Other Important Information - The company completed the sale of Del Taco on December 22, 2025, and the results of Del Taco are excluded from continuing operations [16] - The effective tax rate for continuing operations for Q1 2026 was 32.4%, compared to 30% for the same quarter a year ago [20] Q&A Session Summary Question: Trends observed in January and impact of weather - Management noted that January saw meaningful improvements, with same-store sales performing better than in Q1, despite weather impacts [29][30] Question: Chicago performance and labor inefficiencies - Management acknowledged ongoing challenges in Chicago, attributing them to a tough labor market and operational issues, but expressed optimism for future improvements [31][32] Question: Support for franchisees amid commodity pressures - Management indicated that while franchisees are facing margin pressures, they are not providing blanket assistance but are evaluating individual cases [37] Question: Price-value equation in the current environment - Management stated they have been able to take more price on the company side while ensuring value for customers, including lowering prices on certain bundles [42][43] Question: Breakfast performance relative to competitors - Management reported that breakfast remains consistent for Jack in the Box, with no significant changes compared to other day parts [63][65] Question: Regional performance and California market challenges - Management acknowledged that California presents challenges due to labor pressures and noted that over 40% of their restaurants are based there, impacting overall performance [82][83]