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Jack in the Box (JACK) Q4 Earnings Lag Estimates, Revenues Top

Jack in the Box Inc. JACK reported mixed fourth-quarter fiscal 2022 results, with earnings missing the Zacks Consensus Estimate and revenues beating the same. The top line rose year over year, while the bottom line declined on a year-over-year basis. Revenues surpassed the consensus estimate for the third straight quarter.

Darin Harris, Jack in the Box chief executive officer, stated, “I am very pleased with the momentum of our top line performance to close 2022, which we have seen continue into the first several weeks of Q1, and the consistency we showed throughout the year in driving sales and improving traffic, as we continue to remain careful on the price we are taking to maintain a consistent value equation for our guests.”

Earnings & Revenues Details

During the fiscal fourth quarter, adjusted earnings from continuing operations came in at $1.33 per share. The figure missed the Zacks Consensus Estimate of $1.35. The metric dropped 23.1% from $1.73 reported in the prior-year quarter.

Quarterly revenues of $402.8 million beat the Zacks Consensus Estimate of $392 million by 2.6%. The top line rallied 44.6% on a year-over-year basis. Franchise rental revenues fell 4.4% year over year to $80.7 million. Franchise royalties and other revenues increased 15.5% year over year to $56.9 million. Franchise contributions to advertising and other services revenues rose 3.2% year over year to $50.7 million. Company restaurant sales increased to $214.5 million from $95.6 million reported in the prior-year quarter.

Comps Discussion

In the quarter under review, comps at Jack in the Box’s stores increased 11.4% year over year compared against a decline of 4.4% reported in the prior-year quarter. The upside in comps was primarily due to an increase in average checks partially offset by a decline in traffic (for franchise).

Same-store sales at franchised stores increased 3.2% year over year compared with 0.6% growth reported in the prior-year quarter. System-wide same-store sales increased 4% year over year compared with a 0.1% increase reported in the year-ago quarter.

Del Taco Performance

During fourth-quarter fiscal 2022, same-store sales rose 5.2%, comprising franchise same-store sales growth of 6.4% and company-operated same-store sales growth of 4.1%. During the quarter, the company closed three restaurants.

Operating Highlights

During the fiscal fourth quarter, restaurant-level adjusted margin came in at 16.2% compared with 20.1% reported in the prior-year quarter. The downside was driven by higher food and packaging costs, wage inflation of 11.3% and higher utilities and maintenance and repair costs. However, this was partially offset by menu price increases.

Food and packaging costs (as a percentage of company restaurant sales) fell 10 bps year over year to 30.9%. Commodity costs during the quarter increased 14.9% year over year. The upside can be attributed to a rise in the price of proteins, sauces and oil.

The franchise level margin was 42.4% in the fiscal fourth quarter compared with 41.4% reported in the prior-year quarter.

During the quarter, selling, general and administrative expenses accounted for 9.3% of total revenues compared with 7.6% reported in the prior-year quarter.

Balance Sheet

As of Oct 2, 2022, cash totaled $108.9 million compared with $55.3 million as of Oct 3, 2021. Inventories during the quarter came in at $5.3 million compared with $2.3 million as of Oct 3, 2021. Long-term debt (net of current maturities) totaled $1,799.5 million as of Oct 2, 2022, compared with $1,273.4 million at the end of Oct 3, 2021.

During the fiscal fourth quarter, the company repurchased nearly 0.3 million shares for an aggregate cost of $25 million. As of Oct 2, the company stated the availability of $175 million under its repurchase program.

The company declared a cash dividend of 44 cents per share. The dividend will be paid out on Dec 22, 2022, to shareholders on record as of Dec 7, 2022.

2022 Highlights

Total revenues in fiscal 2022 amounted to $1,468.1 million compared with $1,143.7 million in fiscal 2021.

Adjusted EBITDA in fiscal 2022 came in at $306.6 million compared with $331.4 million in fiscal 2021.

Diluted net earnings per share (EPS) for fiscal 2022 came in at $5.45, compared with $7.37 reported in the prior year.

Fiscal 2023 Outlook

For fiscal 2023, the company anticipates Jack in the Box Restaurant Level Margin to be 18-20%. Del Taco Restaurant Level Margin is expected to be in the range of 14-16%. The company expects Same Store sales for Jack in the Box and Del Taco to be in the low single digits.

Company-wide CapEx and Other Investments in fiscal 2023 are expected in the range of $75-90 million. SG&A expenses are estimated at approximately $160-170 million.

Company-wide operating earnings per share EPS for fiscal 2023 are expected in the range of $5.25 to $5.65.

Zacks Rank & Key Picks

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

Some better-ranked stocks in the Zacks Retail – Restaurants industry are Wingstop Inc. WING, Chuy's Holdings, Inc. CHUY and Chipotle Mexican Grill, Inc. CMG.

Wingstop sports a Zacks Rank #1. WING has a long-term earnings growth rate of 11%. Shares of WING have declined 6.2% in the past year.

The Zacks Consensus Estimate for Wingstop’s 2023 sales and EPS suggests growth of 18.1% and 16.4%, respectively, from the comparable year-ago period’s levels.

Chuy’s Holdings currently carries a Zacks Rank #2 (Buy). CHUY has a trailing four-quarter earnings surprise of 18.6%, on average. Shares of CHUY have increased 1.2% in the past year.

The Zacks Consensus Estimate for Chuy’s Holdings 2023 sales and EPS suggests growth of 8.6% and 11.7%, respectively, from the corresponding year-ago period’s levels.

Chipotle currently carries a Zacks Rank #2. CMG has a trailing four-quarter earnings surprise of 4.1%, on average. The stock has declined 11.8% in the past year.

The Zacks Consensus Estimate for Chipotle’s 2022 sales and EPS suggests growth of 15.1% and 31%, respectively, from the corresponding year-ago period’s levels.

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