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Menu Innovation to Aid Jack in the Box (JACK), High Costs Ail
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Jack in the Box Inc. (JACK - Free Report) will likely benefit from menu innovation, digital initiatives and expansion efforts. Also, the emphasis on delivery channels, franchise development and the Del Taco brand bodes well. However, labor and utility inflation are a concern for the company.
Let us discuss the factors that highlight why investors should retain the stock now.
Factors Driving Growth
Emphasis on Menu Innovation: The company is consistently working to maintain the uniqueness of its brand, menu and premium food offerings. The company emphasizes improving breakfast offerings and deals through digital channels to meet consumer needs. JACK provides a range of value menu items, including the $3 wrap and $10 Fan Phase. The company offers deals like two tacos for 99 cents to enhance loyalty. A new value menu, along with revised Jack deals, is set for release in 2024.
Given the menu diversity, price points and positive customer feedback, the company remains flexible and resilient against a shift in customer behavior. The company intends to focus on innovation plus beverage and snack attachment to support the hook-and-build strategy.
Improving Delivery Channels: Jack in the Box is also focusing on delivery channels, which is a growing area for the industry. Given the high demand for this service, the company has undertaken third-party delivery channels to bolster transactions and sales. The company is investing aggressively in store improvements and new store builds, innovating via digital operations. Moreover, the company is using its digital platforms to enhance overall guest experiences and customer satisfaction.
In the first quarter of fiscal 2024, the company reported digital sales growth of about 12% year over year, with notable growth in first-party web and app ordering.
During the first-quarter fiscal 2024 earnings call, the company stated that it emphasized investing more in technology, with the implementation of a new point-of-sale system at Jack. This initiative is aimed at driving automation and efficiency within the restaurant.
Focus on Franchising to Drive Growth: The company focuses on repairing its franchisee relationship, mapping markets and rebuilding its store pipeline to drive growth. The company continues to collaborate with its franchisees and leverage guest insights to ensure value remains a competitive advantage for both brands. During first-quarter fiscal 2024, JACK announced two new franchise agreements. The first will add 10 restaurants to its Florida expansion, while the second involves a new franchisee bringing Jack to Michigan by signing on to build five restaurants.
Del Taco to Drive Growth: During first-quarter fiscal 2024, Del Taco same-store sales increased 2.2%, comprising franchise same-store sales growth of 2.4% and company-operated same-store sales rise of 1.8%. The upside was driven by the Birria promotion, a new product introduced during the quarter.
During the fiscal first quarter, a letter of intent was signed to refranchise an additional 25 restaurants, including development agreements. JACK is on track for 40-60 refranchised restaurants in 2024, aiming to have Del 90% franchised by the end of 2025.
Concerns
In the past six months, Jack in the Box’s shares have dropped 0.1% against the industry’s 7.7% rise. The downside was mainly caused by wage and utility inflation.
Image Source: Zacks Investment Research
During first-quarter fiscal 2024, Del Taco restaurant level margin contracted 50 basis points (bps) year over year to 15.6%, due to wage and utility inflation, as well as a change in the mix of restaurants. Labor (as a percentage of sales) during the reporting quarter increased by 100 bps year over year to 35.2%, mainly due to wage inflation, which amounted to approximately 3.2% in the quarter. Occupancy and other operating expenses rose by 70 bps year over year to 22.2%, primarily driven by higher utility costs and a change in the mix of restaurants. The company stated concerns about a challenging inflationary environment in 2024.
Zacks Rank & Key Picks
Jack in the Box currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Zacks Retail-Wholesale sector include:
The Zacks Consensus Estimate for EAT’s 2024 sales and earnings per share (EPS) indicates 4.9% and 30.4% growth, respectively, from the year-ago period’s levels.
Texas Roadhouse, Inc. (TXRH - Free Report) carries a Zacks Rank #2. It has a trailing four-quarter negative earnings surprise of 3.9%, on average. The stock has gained 43% in the past year.
The Zacks Consensus Estimate for TXRH’s 2024 sales and EPS suggests rises of 14.1% and 25.8%, respectively, from the year-ago period’s levels.
Shake Shack Inc. (SHAK - Free Report) carries a Zacks Rank #2. It has a trailing four-quarter earnings surprise of 92.6%, on average. Shares of SHAK have increased 89.2% in the past year.
The Zacks Consensus Estimate for SHAK’s 2024 sales and EPS indicates 14.6% and 91.9% growth, respectively, from the year-ago period’s levels.
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Menu Innovation to Aid Jack in the Box (JACK), High Costs Ail
Jack in the Box Inc. (JACK - Free Report) will likely benefit from menu innovation, digital initiatives and expansion efforts. Also, the emphasis on delivery channels, franchise development and the Del Taco brand bodes well. However, labor and utility inflation are a concern for the company.
Let us discuss the factors that highlight why investors should retain the stock now.
Factors Driving Growth
Emphasis on Menu Innovation: The company is consistently working to maintain the uniqueness of its brand, menu and premium food offerings. The company emphasizes improving breakfast offerings and deals through digital channels to meet consumer needs. JACK provides a range of value menu items, including the $3 wrap and $10 Fan Phase. The company offers deals like two tacos for 99 cents to enhance loyalty. A new value menu, along with revised Jack deals, is set for release in 2024.
Given the menu diversity, price points and positive customer feedback, the company remains flexible and resilient against a shift in customer behavior. The company intends to focus on innovation plus beverage and snack attachment to support the hook-and-build strategy.
Improving Delivery Channels: Jack in the Box is also focusing on delivery channels, which is a growing area for the industry. Given the high demand for this service, the company has undertaken third-party delivery channels to bolster transactions and sales. The company is investing aggressively in store improvements and new store builds, innovating via digital operations. Moreover, the company is using its digital platforms to enhance overall guest experiences and customer satisfaction.
In the first quarter of fiscal 2024, the company reported digital sales growth of about 12% year over year, with notable growth in first-party web and app ordering.
During the first-quarter fiscal 2024 earnings call, the company stated that it emphasized investing more in technology, with the implementation of a new point-of-sale system at Jack. This initiative is aimed at driving automation and efficiency within the restaurant.
Focus on Franchising to Drive Growth: The company focuses on repairing its franchisee relationship, mapping markets and rebuilding its store pipeline to drive growth. The company continues to collaborate with its franchisees and leverage guest insights to ensure value remains a competitive advantage for both brands. During first-quarter fiscal 2024, JACK announced two new franchise agreements. The first will add 10 restaurants to its Florida expansion, while the second involves a new franchisee bringing Jack to Michigan by signing on to build five restaurants.
Del Taco to Drive Growth: During first-quarter fiscal 2024, Del Taco same-store sales increased 2.2%, comprising franchise same-store sales growth of 2.4% and company-operated same-store sales rise of 1.8%. The upside was driven by the Birria promotion, a new product introduced during the quarter.
During the fiscal first quarter, a letter of intent was signed to refranchise an additional 25 restaurants, including development agreements. JACK is on track for 40-60 refranchised restaurants in 2024, aiming to have Del 90% franchised by the end of 2025.
Concerns
In the past six months, Jack in the Box’s shares have dropped 0.1% against the industry’s 7.7% rise. The downside was mainly caused by wage and utility inflation.
Image Source: Zacks Investment Research
During first-quarter fiscal 2024, Del Taco restaurant level margin contracted 50 basis points (bps) year over year to 15.6%, due to wage and utility inflation, as well as a change in the mix of restaurants. Labor (as a percentage of sales) during the reporting quarter increased by 100 bps year over year to 35.2%, mainly due to wage inflation, which amounted to approximately 3.2% in the quarter. Occupancy and other operating expenses rose by 70 bps year over year to 22.2%, primarily driven by higher utility costs and a change in the mix of restaurants. The company stated concerns about a challenging inflationary environment in 2024.
Zacks Rank & Key Picks
Jack in the Box currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Zacks Retail-Wholesale sector include:
Brinker International, Inc. (EAT - Free Report) carries a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 212.7% on average. Shares of EAT have surged 29.6% in the past year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for EAT’s 2024 sales and earnings per share (EPS) indicates 4.9% and 30.4% growth, respectively, from the year-ago period’s levels.
Texas Roadhouse, Inc. (TXRH - Free Report) carries a Zacks Rank #2. It has a trailing four-quarter negative earnings surprise of 3.9%, on average. The stock has gained 43% in the past year.
The Zacks Consensus Estimate for TXRH’s 2024 sales and EPS suggests rises of 14.1% and 25.8%, respectively, from the year-ago period’s levels.
Shake Shack Inc. (SHAK - Free Report) carries a Zacks Rank #2. It has a trailing four-quarter earnings surprise of 92.6%, on average. Shares of SHAK have increased 89.2% in the past year.
The Zacks Consensus Estimate for SHAK’s 2024 sales and EPS indicates 14.6% and 91.9% growth, respectively, from the year-ago period’s levels.