Jack in the Box Inc. (JACK) Q1 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary presents a mixed picture: while there are positive developments like debt reduction and improved January sales, challenges such as labor inefficiencies and inflationary pressures persist. The Q&A section reveals some optimism, especially with positive initial responses to marketing and technology investments, but concerns remain about regional performance and inflation impacts. Adjusted EBITDA and restaurant margin guidance are moderate, and the lack of clear guidance on some issues tempers enthusiasm. Overall, the sentiment is neutral, with no strong catalysts to drive significant stock price movement.
Key Financial Performance
Same-store sales Decreased 6.7% year-over-year, with franchise restaurant same-store sales down 7% and company-owned same-store sales down 4.7%. The decline was due to a decrease in transactions and sales mix, partially offset by menu price increases.
Restaurant level margin percentage Decreased to 16.1% from 23.2% year-over-year. This was driven by a 380 basis point increase in food and packaging costs due to 7.1% commodity inflation, a prior year beverage benefit, and a change in the mix of restaurants. Labor costs also increased by 200 basis points due to elevated labor in Chicago restaurants.
Franchise-level margin Decreased to $84.1 million or 38.6% of franchise revenues, down from $97.1 million or 40.9% a year ago. The decrease was driven by lower sales, resulting in reduced rent and royalty revenue, and a decrease in the number of restaurants.
SG&A expenses Decreased to $37 million or 10.6% of revenues, down from $41.2 million or 11.1% a year ago. The decrease was due to market fluctuations of COLI policies and income from a transition services agreement, partially offset by increased IT and digital advertising costs.
Earnings from continuing operations Decreased to $14.4 million from $31 million year-over-year. This decline reflects the impact of sales deleverage and other operating expenses.
GAAP diluted earnings per share Decreased to $0.75 from $1.61 year-over-year. The decline was due to lower earnings from continuing operations.
Operating earnings per share Decreased to $1 from $1.86 year-over-year, primarily due to sales deleverage.
Consolidated adjusted EBITDA Decreased to $68.2 million from $88.8 million year-over-year, primarily due to the impact of sales deleverage.
Capital expenditures Totaled $23.2 million for the quarter, primarily for restaurant IT. Approximately $8 million was related to prior year expenditures for new Chicago restaurants, reflecting a timing impact rather than incremental spending.
Debt reduction A partial prepayment of $105 million was made on the August 2026 tranche, reducing total debt outstanding to $1.6 billion. The net debt to adjusted EBITDA leverage ratio is now 6.5x.
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Operating Highlights
75th Anniversary Marketing Calendar: Launched with a throwback combo in the Chicken Supreme Munchie Meal and a new fan favorite, Jibbi, a backpack charm. This drove increased sales of Munchie Meals, which have a higher average check.
Hot Mess Burger: Reintroduced as a limited-time offer, paired with a collectible antenna ball featuring the Meat Riot Jack head.
Anniversary Tour: Kicked off in Los Angeles and will land in Austin for the brand's 75th anniversary, incorporating experiential marketing.
Restaurant Audit Process: Enhanced to reinforce critical behaviors and standards to elevate the guest experience.
Field Support Restructuring: Increased presence in restaurants for real-time support to franchisees and team members.
Training Alignment: Aligned training on core principles to simplify team member experience and reinforce fundamentals.
Restaurant Refreshes: Implemented cost-effective refreshes in 20 restaurants, generating low single-digit sales lifts, with expansion in Southern California.
Technology Modernization: Rolled out new POS and back-of-house systems to improve cost efficiencies and upsell capabilities.
Sale of Del Taco: Completed in December 2025, with significant debt paydown following the transaction.
Debt Reduction: Partial prepayment of $105 million on August 2026 tranche, with plans to pay down an additional $200 million.
Franchisee Economics: Focused on closing underperforming restaurants, resulting in a 30% sales benefit to nearby locations.
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Risk or Challenges
Same-store sales decline: Jack in the Box experienced a 6.7% decrease in same-store sales, driven by a decline in transactions and sales mix, partially offset by menu price increases. This decline impacts revenue and profitability.
Labor cost pressures: Labor costs increased to 35.3% of sales, driven by elevated labor costs in the Chicago market. Despite some improvement, this remains a challenge requiring urgent attention.
Commodity inflation: Food and packaging costs rose to 29.7% of sales due to 7.1% commodity inflation, negatively impacting margins.
Restaurant closures: 14 restaurants were closed in the quarter, with closures moving slower than expected due to franchisees evaluating lease dynamics and sales transfer benefits.
Debt levels: Despite a $105 million debt prepayment, the company still has $1.6 billion in total debt, with a high net debt to adjusted EBITDA leverage ratio of 6.5x, posing financial risk.
Sales deleverage: Lower sales have led to reduced rent and royalty revenue, impacting franchise-level margins.
Utility and operating cost increases: Occupancy and other costs increased by 120 basis points due to higher utility and operating expenses, further pressuring margins.
Market conditions for refinancing: The company faces challenges in assessing refinancing options for upcoming debt tranches, considering market conditions and interest rates.
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Guidance & Outlook
Revenue Expectations: The company expects steady improvement on the top line as they move through 2026, despite a slow start to the year.
Margin Projections: Restaurant-level margin percentage decreased to 16.1% in Q1, down from 23.2% in the prior year. The company is working on improving margins through operational efficiencies and cost management.
Capital Expenditures: Capital expenditures for fiscal 2026 are focused on technology and restaurant reimages, with $23.2 million spent in Q1. The company plans to preserve capital expenditures for these areas.
Debt Reduction: The company made a partial prepayment of $105 million on its August 2026 tranche and plans to pay down an additional $200 million in debt over the course of the JACK on Track plan.
Market Trends and Business Segment Performance: The company is seeing early positive results from simplification efforts in operations and marketing, which are expected to drive improved same-store sales throughout 2026. They are also focusing on franchisee economics by closing underperforming restaurants, which has shown a 30% sales benefit to nearby restaurants.
Strategic Plans: The company is modernizing its restaurants with cost-effective refreshes, which have shown low single-digit sales lifts in test markets. They are also leveraging new POS and back-of-house systems for cost efficiencies and better upsell capabilities.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:What trends are being observed in the 75th anniversary marketing and January sales?
A:The initial response to the 75th anniversary marketing has been positive, and January trends showed improvement. Same-store sales in Q2 started a couple of hundred basis points better than Q1, and after factoring in weather impacts, they were over 400 basis points better. However, the company is still aiming for better performance.
Q:What is the status of Chicago's performance and labor inefficiencies?
A:Chicago's performance is still a drag due to labor market challenges and the rapid opening of 8 restaurants in under 3 months. The company has not yet turned on 24-hour operations, digital, or the full menu, which limits top-line growth. Management is prioritizing resolving these issues and expects improvements in the coming months.
Q:What is being done to support franchisees with four-wall margins under pressure?
A:Franchisees are facing pressure on four-wall EBITDA due to sales conditions and beef inflation. While no blanket assistance is being provided, the company is addressing one-off cases and focusing on profitability through measures like restructuring teams, rolling out new soft drink dispensers, and revamping digital programs, including loyalty.
Q:How is the company balancing pricing and value to protect margins and unit economics?
A:The company has taken modest price increases while maintaining a strong value proposition. They have adjusted prices on bundles and increased soft drink sizes to show value to customers while protecting profitability for both corporate and franchisees.
Q:Why is there a gap in comp performance between company and franchise restaurants?
A:The gap is attributed to pricing disparities and differences in participation in digital promotions. Company restaurants fully opt into digital offers, leading to better effectiveness compared to franchisees, who are more selective.
Q:How does the company compete against larger competitors during intense value competition?
A:The company focuses on consistent value and innovation, leveraging unique offerings like Munchie Meals and tacos. They also emphasize quality improvements in their core menu to enhance the value-for-money perception.
Q:What is the outlook for commodity inflation, particularly beef?
A:Commodity inflation is expected to be mid-single digits for the year, with beef inflation in double digits during Q1. Beef prices are expected to moderate as the year progresses but are unlikely to become a tailwind in the next 12-18 months.
Q:What impact has weather had on performance?
A:Weather, particularly Winter Storm Fern, negatively impacted performance by a couple of hundred basis points in January. There were no meaningful benefits from weather in late December or early January.
Q:What is the performance of the breakfast daypart?
A:Breakfast has been consistent and aligns with other dayparts, except for late night, which showed gains. The company continues to emphasize all-day breakfast as a core offering.
Q:What is the plan for the remodel program and franchisee funding?
A:The current focus is on a low-cost mini refresh to improve curb appeal, costing under $20,000 for corporate and under $10,000 for franchisees. A full-scale reimage program is planned for the end of the year, with corporate expected to contribute around 35% of the costs.
Q:What is the status of Hispanic consumer demand?
A:Hispanic consumer demand has shown slight improvement but remains largely unchanged. It is trending similarly to overall sequential improvements.
Q:What technology investments have been made to drive efficiency?
A:The company has rolled out a new POS system and back-of-house systems for labor management and inventory. These systems are expected to drive efficiencies in both top-line and bottom-line performance.
Q:How is regional performance, particularly in California, affecting the company?
A:California, which accounts for over 40% of restaurants, has been challenging due to sales and labor pressures. This creates a headwind for overall performance compared to competitors with less exposure to the state.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the historical increase in beef prices over the past few years and its potential impact on franchisee cash flows. They also did not provide clear guidance on the expected timeline for improvements in Hispanic consumer demand or the exact financial impact of the new technology investments.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Austin anniversary
Burger offer
Chicken Supreme
Del Taco
Guests nostalgia
Hooper Chief
Hot Mess
Instructions Vice
JACK Track
Jibbi
Munchie
Stockholders
Track plan
Way
activation
connection
cost
expectation start
fan favorite
field
foundation
fundamental
guest experience
line expectation
marketing calendar
medium
member
participant
profitability term
proxy
response
statement material
team
training
trial
JACK Transcript
Jack in the Box Inc. (JACK) Q1 2026 Earnings Call Transcript
Unknown2-18
The earnings call summary presents a mixed picture: while there are positive developments like debt reduction and improved January sales, challenges such as labor inefficiencies and inflationary pressures persist. The Q&A section reveals some optimism, especially with positive initial responses to marketing and technology investments, but concerns remain about regional performance and inflation impacts. Adjusted EBITDA and restaurant margin guidance are moderate, and the lack of clear guidance on some issues tempers enthusiasm. Overall, the sentiment is neutral, with no strong catalysts to drive significant stock price movement.
Jack in the Box Inc. (JACK) Q4 2025 Earnings Call Transcript
Unknown11-19
The earnings call summary indicates mixed signals: modest improvements in same-store sales and effective marketing spend are positive, but negative sales projections and planned restaurant closures are concerning. The strategic focus on technology and innovation is promising, yet the lack of strong guidance and financial pressures on franchisees temper optimism. The Q&A reveals cautious macro assumptions and supportive franchisee sentiment, but also highlights financial challenges. Overall, these factors suggest a neutral stock price movement, with no strong catalysts for significant change.
Jack in the Box Inc. (JACK) Q3 2025 Earnings Call Transcript
Unknown8-6
The earnings call highlights a mixed picture: there are positive developments such as digital sales growth and strong franchisee support, but challenges remain with same-store sales and significant debt. The Q&A section reveals management's cautious optimism and some lack of clarity on critical metrics, which tempers enthusiasm. The lack of a new partnership announcement or significant positive catalyst, combined with ongoing operational challenges, suggests a neutral stock price reaction in the short term.
Jack in the Box, Inc. (JACK) Q2 2025 Earnings Call Transcript
Unknown5-14
The earnings call revealed several negative factors: declining same-store sales, reduced margins, and a substantial noncash goodwill impairment leading to a significant GAAP loss. Despite maintaining guidance and some operational initiatives, the Q&A highlighted industry challenges, IT issues, and a cautious consumer base. The strategic alternatives for Del Taco and lack of clarity on closures add uncertainty. These factors, combined with reduced share repurchases and high debt, suggest a negative sentiment for the stock price in the near term.
JACK Report
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