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% [18] - Jack's restaurant level margin percentage decreased to 16.1%, down from 23.2% [18] - Earnings from continuing operations were $14.4 million for Q1 2026, compared to $31 million for the same quarter last year [23] - GAAP diluted earnings per share from continuing operations for Q1 was $0.75, down from $1.61 in the prior year [24] - Consolidated adjusted EBITDA was $68.2 million, down from $88.8 million in the prior year [24] 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 [20] - SG&A for the quarter was $37 million or 10.6% of revenues, down from $41.2 million or 11.1% a year ago [20] 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% [19] - Labor costs as a percentage of sales were 35.3%, increasing 200 basis points from the prior year [19] Company Strategy and Development Direction - The company is focused on simplifying the business and reducing debt, having successfully closed the sale of Del Taco and made a significant debt paydown [7][8] - The Jack On Track plan aims to bolster long-term financial performance by strengthening the balance sheet and positioning the company for sustainable growth [25] - The company is enhancing its value proposition and menu strategy, celebrating its 75th anniversary with brand activations and new product launches [13][14] 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 [9][11] - The company anticipates steady improvement in top-line performance as it focuses on fundamentals essential for sustainable growth [11][16] - Management expressed confidence in the actions being taken to strengthen the business and drive long-term shareholder value [17] Other Important Information - The company expects to generate $50 million-$60 million from real estate sales by the end of fiscal year 2026, which will be used to pay down debt [27] - The effective tax rate for continuing operations for Q1 was 32.4%, compared to 30% for the same quarter a year ago [23] Q&A Session Summary Question: Trends observed in January and impact of weather - Management noted that January showed meaningful improvements, with same-store sales performing better than in Q1, despite weather impacts [32] Question: Chicago performance and labor inefficiencies - Management acknowledged ongoing challenges in Chicago due to a tough labor market and operational issues, but expressed optimism for improvements in the coming months [35][36] Question: Franchisee four-wall margins and support - Management indicated that while franchisees are facing margin pressures, they are not providing blanket assistance but are looking into specific cases [40][41] Question: Price-value equation and protecting margins - Management discussed their ability to take price increases while maintaining a strong value proposition for customers, including adjustments to bundles and portion sizes [43][45] Question: Breakfast performance relative to competitors - Management stated that breakfast remains a consistent part of their offering, with no significant changes in performance compared to other day parts [66][67] 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 located there, impacting overall performance [86]