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Sales-Driving Plans Aid Jack in the Box (JACK), High Costs Ail

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Jack in the Box Inc. (JACK - Free Report) is benefiting from menu innovation, focus on delivery channels and marketing strategies. It is investing aggressively in store improvements and new store build. However, high costs remain a concern.

Growth Drivers

Menu innovation is one of the primary characteristics of JACK. It is the nation’s one of the largest hamburger chains. The company is continuously working on maintaining the uniqueness of its brand, menu and premium food offerings.

Jack in the Box continues to focus on driving operating excellence across its existing store base by building brand loyalty. Given the menu diversity, price points and positive customer feedback, it remains flexible and resilient against a shift in customer behavior. Going forward, management intends to focus on innovation plus beverage and snack attachment to support the hook-and-build strategy. This and the emphasis on value messaging are likely to drive frequency in the upcoming periods.

JACK is also increasingly 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. It partnered with DoorDash, Postmates, Grubhub and Uber Eats. It is expanding its mobile application in a few markets that support order-ahead functionality and payment. In the first quarter of fiscal 2024, the company reported digital sales growth of about 12% year over year, with a notable uptick in first-party web and app ordering.

The company, which shares space with McDonald's Corporation (MCD - Free Report) , The Wendy's Company (WEN - Free Report) and The Cheesecake Factory Incorporated (CAKE - Free Report) , is also benefiting from the Del Taco merger. During first-quarter fiscal 2024, Del Taco's 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.

Del experienced flat net unit growth, including three restaurant openings, in first-quarter fiscal 2024. The company currently holds 155 development agreements at quarter-end, with 49 sites in the construction or permitting phases.


High costs remain a concern for JACK. 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 cost (as a percentage of sales) increased 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 70 bps year over year to 22.2%, primarily driven by higher utility costs and a change in the mix of restaurants.

A Brief Review of the Other Stocks

McDonald's is benefiting from menu price increases, marketing campaigns, and digital and delivery growth. Looking ahead to 2024, McDonald's expects comps growth to align with historical averages of 3-4% in the United States and International Operated Market segments. Notable initiatives such as Festive Wins in the U.K. and the 30-days, 30-deals campaign in Australia enhanced customer engagement and loyalty. MCD reported success with reasonable pricing and monopoly promotions in various countries, achieving significant milestones in loyalty program membership and sales.

Wendy's is benefitting from higher average checks, strategic pricing actions and product innovations. Management anticipates this momentum to persist in the future, projecting global same-restaurant sales growth in the 3-4% range for fiscal 2024. It is also investing in digital initiatives, allocating funds to deploy digital menu boards in U.S. company-operated restaurants and enhance global digital menu board capabilities.

Cheesecake Factory is benefiting from unit expansion efforts, improved traffic and a favorable menu mix.  It emphasizes the Cheesecake rewards program, reporting increased member activity and ongoing testing to enhance membership enrollment and engagement. CAKE also focuses on its FRC-related differentiated concepts and emerging brands to drive growth. It plans to open up to 22 new restaurants in fiscal 2024, including expansions of Cheesecake Factory, North Italia, Flower Child and FRC establishments.

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