Back to top

Image: Bigstock

Jack in the Box (JACK) Q1 Earnings Top, Revenues Lag Estimates

Read MoreHide Full Article

Jack in the Box Inc. (JACK - Free Report) reported mixed first-quarter fiscal 2022 results, with earnings beating the Zacks Consensus Estimate and revenues missing the same. The bottom line beat the estimate for the seventh straight quarter. However, revenues missed the estimate for the second straight quarter. Following the results, the company’s shares dropped 2.2% on Feb 23.

Darin Harris, Jack in the Box chief executive officer, stated, “We began fiscal 2022 with solid results, including comps on a two-year basis of +13.7%, despite a challenging operating environment for the entire industry. I am proud of the resilience demonstrated by our franchisees, operators and corporate team members in delivering for our guests during a difficult period. We remain highly focused on fundamentals, franchisee health and showing progress on our long-term restaurant growth goals.”

During first-quarter 2022, the company signed 26 developments agreements for 98 future restaurants.

Let’s take a closer look at the numbers.

Earnings & Revenue Details

During the fiscal first quarter, adjusted earnings from continuing operations came in at $1.97 per share. The figure beat the Zacks Consensus Estimate of $1.92. However, the metric dropped 0.5% year over year.

Quarterly revenues of $344.7 million missed the Zacks Consensus Estimate of $346 million. However, the top line increased 1.8% on a year-over-year basis. Franchise rental revenues fell 0.3% year over year to $103.1 million. Franchise royalties and other revenues rose 1.9% year over year to $60.8 million owing to a rise in franchise same-store sales. Franchise contributions to advertising and other services revenues inched up 0.1% year over year to $60.8 million. Company restaurant sales increased to $120.1 million from $114.3 million.

Comps Discussion

Comps at Jack in the Box’s stores declined 0.3% in the fiscal first quarter from 7.5% reported in the prior-year quarter. The downside in comps was primarily due to dismal traffic, offset by an increase in average check.

Same-store sales at franchised stores increased 1.4% year over year compared with 13% growth reported in the prior-year quarter. System-wide same-store sales increased 1.2% year over year compared with a 12.5% gain reported in the year-ago quarter.

Operating Highlights

During the fiscal first quarter, restaurant-level adjusted margin came in at 18.3% compared with 25.5% reported in the prior-year quarter. The downside was driven by rise in food and packaging costs, wage inflation of 10.9% as well as higher utilities and maintenance and repair costs. The decline was marginally overshadowed by lower incentive-based compensation and menu price increases.

Food and packaging costs (as a percentage of company restaurant sales) rose 300 bps to 31.3% year over year. Commodity costs during the quarter increased 10.5% year over year. The upside can be attributed to a rise in the price of beef, pork, sauces and oil.

The franchise level margin was 41.6% in the fiscal first quarter compared with 41.5% in the prior-year quarter.

During the quarter, selling, general and administrative expenses accounted for 7.4% of total revenues compared with 6.1% in the prior-year quarter.

Balance Sheet

As of Jan 23, 2022, cash (inclusive of restricted cash) totaled $70.2 million compared with $55.3 million as of Oct 3, 2021. Inventories during the quarter came in at $2.7 million compared with $2.3 million as of Oct 3, 2021. Long-term debt (net of current maturities) totaled $1,274.8 million as of Jan 23 compared with $1,273.4 million at the end of Oct 2, 2021.

During the fiscal first quarter, the company did not repurchase any shares. On Nov 19, 2021, the company’s board of directors announced an additional $200.0 million stock buy-back program that expires on Nov 20, 2023.

The company declared a cash dividend of 44 cents per share. The dividend will be paid out on Mar 22, 2022, to shareholders on record as of Mar 9, 2022.

Jack in the Box currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Key picks

Some better-ranked stocks in the Zacks Retail-Wholesale sector include Genesco Inc. (GCO - Free Report) , Arcos Dorados Holdings Inc. (ARCO - Free Report) and Tapestry, Inc. (TPR - Free Report) .

Genesco sports a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 2,739.6%, on average. Shares of the company have increased 29.7% in the past year.

The Zacks Consensus Estimate for Genesco’s 2022 sales and EPS suggests growth of 35.3% and 673.7%, respectively, from the year-ago period’s levels.

Arcos Dorados carries a Zacks Rank #2 (Buy). ARCO has a long-term earnings growth of 24.7%. Shares of the company have increased 31.3% in the past year.

The Zacks Consensus Estimate for Arcos Dorados’ 2022 sales and EPS suggests growth of 33.2% and 118.1%, respectively, from the year-ago period’s levels.

Tapestry carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 28.2%, on average. Shares of the company have declined 5.1% in the past year.

The Zacks Consensus Estimate for Tapestry’s 2022 sales and EPS suggests growth of 17.6% and 22.9%, respectively, from the year-ago period’s levels.