WSM's Q3 Earnings & Revenues Top Estimates, FY24 View Revised

Jack in the Box Inc. JACK has announced that it is expanding on its prior development agreements to open franchisee locations in West Michigan. The recently announced agreement highlights the opening of five new stores in the Detroit, MI, market with different franchisees.

The five new locations will offer dine-in, drive-thru and mobile ordering options, ensuring top-tier services for customers.

JACK’s Anticipated Openings in Michigan

Before signing the five-unit development agreement in Detroit, JACK already started its expansion plans with five locations in West Michigan. These locations are currently under construction and are expected to open over the next five years, with the first one scheduled to open in Battle Creek.

Furthermore, the company recently opened two Cloud Kitchens in downtown Chicago, IL, and is on track for additional Chicagoland expansion. The expansion in Chicagoland will underscore the planned opening of eight company-operated units and 12 commitments with a new franchisee.

The moves mentioned above condense toward JACK’s plan on expanding into the Midwest market of the United States. Given the trajectory of new location openings, it can be understood that the company is positioning itself well to expand its market reach and customer base in the country, thus fostering sales growth.

Jack in the Box’s Development Efforts Bode Well

Jack in the Box continues to collaborate with its franchisees and leverage guest insights to ensure value remains a competitive advantage for both brands. Its restaurants are primarily franchised, highlighting that franchising a large chunk of its system will lower its general and administrative expenses and boost earnings.

In fiscal 2024, JACK opened 30 new restaurants, including 16 new restaurant openings during the fourth quarter. Since the launch of the development program in 2021, the company has signed 101 agreements for 464 restaurants, with 51 already opened as of the end of the fiscal fourth quarter. It emphasized rapid expansion plans in the Chicago market, with intentions to open eight company-operated locations in the calendar year 2025, along with entering into an agreement with a new franchisee for 12 restaurants. It also, expects to enter the Florida market by the end of calendar year 2024.

JACK stock has declined 10.4% in the past three months against the Zacks Retail - Restaurants industry’s 5.5% growth. The company is affected by softer sales performance due to a decrease in transactions and an unfavorable menu mix, given the uncertain market scenario regarding discretionary spending. Nonetheless, the company’s ongoing unit development efforts, focus on delivery channel strengthening and menu innovation are likely to boost growth in the upcoming period.

JACK’s Zacks Rank & Key Picks

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

Here are some better-ranked stocks from the Zacks Retail-Wholesale sector.

Deckers Outdoor Corporation DECK currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

DECK has a trailing four-quarter earnings surprise of 41.1%, on average. The stock has gained 18.5% in the past six months. The Zacks Consensus Estimate for DECK’s fiscal 2025 sales and earnings per share (EPS) indicates growth of 13.6% and 12.6%, respectively, from the year-ago period’s levels.

Brinker International, Inc. EAT presently flaunts a Zacks Rank of 1. EAT has a trailing four-quarter earnings surprise of 12.1%, on average. The stock has surged 93.3% in the past six months.

The consensus estimate for EAT’s fiscal 2025 sales and EPS indicates growth of 7.9% and 34.6%, respectively, from the year-ago period’s levels.

Sprouts Farmers Market, Inc. SFM currently sports a Zacks Rank of 1. SFM has a trailing four-quarter earnings surprise of 15.3%, on average. The stock has risen 80.3% in the past six months.

The Zacks Consensus Estimate for SFM’s 2024 sales and EPS indicates a rise of 12.2% and 29.6%, respectively, from the year-ago period’s levels.

Zacks Investment Research

Jack in the Box Inc. JACK reported mixed fourth-quarter fiscal 2024 results, with earnings beating the Zacks Consensus Estimate and revenues missing the same. The top line also declined year over year. Following the results, the company’s shares lost 3.3% in the after-hour trading session yesterday.

JACK’s Earnings & Revenues Details

In the fiscal fourth quarter, operating earnings per share (EPS) was $1.16, beating the Zacks Consensus Estimate of $1.11. The metric rose 5.5% from $1.10 per share reported in the prior-year quarter.

Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.

Quarterly revenues of $349.3 million missed the consensus mark of $358 million. The top line declined 6.2% on a year-over-year basis.

Franchise rental revenues increased 1.5% year over year to $87.3 million. Franchise royalties and other revenues decreased 1.3% year over year to $54.5 million.

Franchise contributions to advertising and other services revenues rose 0.5% year over year to $56.1 million. Company restaurant sales in the quarter was $151.4 million compared with $175 million reported in the prior-year quarter.

JACK’s Comps Discussion

In the quarter under review, company-owned same-store sales declined 2.2% year over year against 4.4% growth reported in the prior-year quarter.

Same-store sales at franchised stores declined 2% year over year against 3.8% growth reported in the prior-year quarter.

Systemwide same-store sales fell 2.1% year over year against 3.9% growth reported in the year-ago quarter. Reduced transactions and an unfavorable mix shift caused this downside.

Del Taco Performance

In fourth-quarter fiscal 2024, company-owned same-store sales moved down 3% year over year, comprising the decline in franchise same-store and system-operated same-store sales of 4.2% and 3.9%, respectively.

Operating Highlights of JACKS

In the fiscal fourth quarter, the total restaurant-level adjusted margin was 15.1% compared with 18% reported in the prior-year quarter. The decline was attributed to reduced transactions and rising costs from inflation, including higher wages, commodity prices and utility expenses, partially offset by menu price increases.

Food and packaging costs (as a percentage of company restaurant sales) fell 80 basis points (bps) year over year to 28.4%.

The total franchise level margin was 38.9% in the fiscal fourth quarter compared with 39.2% reported in the prior-year quarter.

In the quarter under review, selling, general and administrative expenses accounted for 8.6% of total revenues compared with 11.7% in the prior-year quarter.

JACK’s Balance Sheet

As of Sept. 29, 2024, cash totaled $54.2 million compared with $185.9 million as of Oct. 1, 2023. Long-term debt (net of current maturities) totaled $1.69 billion as of Sept. 29, compared with $1.72 billion as of Oct. 1, 2023.

In the fiscal fourth quarter, the company repurchased 0.3 million shares. As of Sept. 29, management announced the availability of $180 million under its share repurchase program.

The company declared a cash dividend of 44 cents per share. The dividend will be paid out on Dec. 30, 2024, to its shareholders on record as of Dec. 12.

JACK’s Fiscal 2025 Outlook

For fiscal 2025, the company anticipates adjusted EBITDA to be in the range of $288-$303 million. Depreciation and Amortization expenses are anticipated to be between $58 million and $60 million.

Jack in the Box Restaurant Level Margin is expected to be 20-22%. The company expects same-store sales for Jack in the Box in the range of flat to up 1%, whereas for Del Taco segment this is expected to be flat to down 1%.

Company-wide operating EPS for fiscal 2024 is expected to be in the range of $5.05-$5.45.

Zacks Rank of JACK

JACK currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Recent Retail-Wholesale Releases

Chipotle Mexican Grill, Inc. CMG reported mixed third-quarter 2024 results, with earnings beating the Zacks Consensus Estimate for the seventh consecutive quarter but revenues missing the same after beating in the preceding four quarters.

CMG reported adjusted EPS of 27 cents, surpassing the Zacks Consensus Estimate of 25 cents. The bottom line increased 17.4% from 23 cents reported in the year-ago quarter. Quarterly revenues of $2,793.6 million missed the consensus mark of $2,817 million. However, the top line rose 13% on a year-over-year basis. This upside was driven by strong comparable restaurant sales growth, backed by higher transactions of 3.3% as well as a 2.7% rise in average checks.

Shake Shack Inc. SHAK posted third-quarter fiscal 2024 results, wherein earnings and revenues beat the Zacks Consensus Estimate. Both top and bottom lines also increased on a year-over-year basis. The company ramped up its investment in marketing strategies and programs, aimed at increasing guest engagement and brand awareness, even amid a challenging market environment. These efforts have paid off, as the company has achieved some of the highest brand awareness levels on record, which, in turn, is fueling robust sales and profitability growth.

SHAK’s fiscal third-quarter adjusted EPS was 25 cents, which beat the Zacks Consensus Estimate of 20 cents. In the prior-year quarter, the company reported adjusted EPS of 17 cents. Quarterly revenues of $316.9 million beat the consensus mark of $315 million. The top line increased 14.7% on a year-over-year basis.

BJ's Restaurants, Inc. BJRI reported third-quarter fiscal 2024 results, with earnings missing the Zacks Consensus Estimate and revenues beating the same. Both top and bottom lines increased on a year-over-year basis.

The company reported an adjusted loss per share of 13 cents. The Zacks Consensus Estimate for the metric was 3 cents per share. In the year-ago quarter, it recorded an adjusted loss per share of 16 cents. Total revenues of $325.7 million beat the consensus mark by 0.04%. The top line inched up 2.2% year over year. This upside was backed by strong guest traffic and Pizookie Meal Deal performance.

Zacks Investment Research