Jack in the Box Inc. (JACK Quick QuoteJACK - Free Report) posted operating earnings of 96 cents per share in the third quarter of fiscal 2026, down 7.7% from $1.04 a year ago, but beat the Zacks Consensus Estimate of 90 cents by 6.7%. Restaurant-level margin edged lower amid commodity inflation and a shift in restaurant mix.

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Quarterly revenues fell 1.8% year over year to $257.7 million, missing the consensus mark of $260 million by 0.9%. Systemwide same-store sales declined 1.1%, as lower transactions were partly offset by higher pricing.

JACK's Same-Store Sales Show a Smaller Decline

Comparable sales remained negative, but the decline was smaller than in the prior-year quarter. Franchise same-store sales fell 1.2% versus a 7.2% decline a year ago, while company-operated comps decreased 0.9% compared with a 6.4% drop.

At company-operated restaurants, average check rose 1%, while transactions declined 1.9%. Menu price increases were approximately 3.5% in the quarter. Systemwide restaurant sales fell to $944.1 million from $957.8 million a year earlier, with franchised restaurant sales decreasing to $847.8 million from $863.7 million.

Jack in the Box Revenue Mix Shows Franchise Pressure

Company restaurant sales increased 2.3% to $96.3 million from $94.1 million. Franchise rental revenues declined 4.6% to $73 million, while franchise royalties and other revenues fell 3.4% to $43.1 million.

Lower percentage rent, fewer franchised restaurants and lower lease termination fees weighed on rental revenues. Franchise-level margin was $60.4 million, or 37.4% of franchise revenues, versus $66.15 million, or 39.3%, a year ago, reflecting lower sales, fewer restaurants and higher bad debt expense. The system ended the fiscal third quarter with 2,115 restaurants after four openings and 17 closures.

JACK's Restaurant Margins Reflect Commodity Inflation

Restaurant-level margin was $16.99 million, or 17.6% of company restaurant sales, compared with $16.86 million, or 17.9%, a year earlier. Food and packaging costs rose to 29.3% of sales from 28.6%, as commodity inflation reached 5.4%, led by beef, tacos, produce and beverages.

Payroll and employee benefit costs improved to 33.7% of sales from 34.5%, driven primarily by the rollover of additional federal unemployment taxes in California, partly offset by restaurant mix and 1.8% labor inflation. Occupancy and other costs rose 30 basis points to 19.3%, reflecting sales deleverage, higher rent and increased third-party delivery fees.

Jack in the Box SG&A Falls on Legal Reversal

Selling, general and administrative expenses declined to $17 million from $20.5 million. Lower legal costs from a litigation reversal and lower stock-based compensation due to forfeitures more than offset an unfavorable $4.20 million swing in company-owned life insurance policy values and higher incentive compensation.

Other operating income, net, was $3.1 million versus other operating expense of $4.5 million a year ago, primarily backed by higher gains on real estate sales. Adjusted EBITDA increased to $61.20 million from $57.15 million.

JACK's Balance Sheet Focus Stays on Debt Reduction

Debt management remained a key capital allocation priority. During the quarter, JACK prepaid $110 million of its Series 2019-1 Class A-2-II notes using excess company-owned life insurance funding and cash on hand. The company also issued $500 million of Series 2026-1 Class A-2 notes and used the proceeds to refinance portions of existing securitized debt.

Total debt stood at $1.43 billion at quarter-end. Cash and restricted cash totaled $71.8 million. Year-to-date cash flow from operating activities was $56.6 million compared with $118.2 million a year earlier, while capital expenditures totaled $44.1 million.

Jack in the Box Updates FY26 Outlook

Management updated fiscal 2026 guidance to a restaurant count of approximately 2,100, including about 25 openings and 50 to 60 closures, most of them franchised. Company-owned restaurant-level margin is projected at approximately 16.5%, incorporating mid-single-digit commodity inflation and low-single-digit wage inflation.

Franchise-level margin is expected to be approximately $265 million. SG&A is forecast at $112 million to $115 million, while adjusted EBITDA is projected at $225 million to $230 million. The company maintained its low-single-digit same-store sales decline outlook and capital expenditure guidance of $45 million to $55 million.

JACK’s Zacks Rank & Key Picks

Jack in the Box currently has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Zacks Retail-Wholesale sector have been discussed below.

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The Zacks Consensus Estimate for BJ's Restaurants’ 2026 sales and EPS indicates year-over-year growth of 4% each.

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The Zacks Consensus Estimate for Five Below’s 2027 sales and EPS indicates growth of 15.1% and 36.1%, respectively, from the year-ago period’s levels.
 
FIGS, Inc. (FIGS Quick QuoteFIGS - Free Report) has a Zacks Rank #2 at present. The company delivered a trailing four-quarter earnings surprise of 201.8%, on average. FIGS stock has risen 26.8% year to date.
 
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