Jack in the Box (JACK) First Quarter Earnings Top, Revenue Lag Estimates

Jack in the Box Inc. JACK reported mixed results for the first quarter of fiscal 2022, with earnings above Zacks’ consensus estimate and missing revenue. The bottom line beat the estimate for the seventh consecutive quarter. However, revenue missed the estimate for the second consecutive quarter. Following the results, the company’s shares fell 2.2% on February 23.

Darin Harris, CEO of Jack in the Box, said, “We started fiscal 2022 with strong results, including two-year compensation of +13.7%, despite a challenging operating environment across the sector. I am proud of the resilience shown by our franchisees, operators and corporate team members to deliver to our customers during a difficult time. We remain very focused on the fundamentals, the health of franchisees and making progress on our long-term restaurant growth objectives.

During the first quarter of 2022, the company signed 26 development agreements for 98 future restaurants.

Let’s take a closer look at the numbers.

Earnings and income details

In the first fiscal quarter, adjusted earnings from continuing operations were $1.97 per share. The figure beat Zacks consensus estimate of $1.92. However, the metric fell 0.5% year over year.

Quarterly revenue of $344.7 million topped Zacks’ consensus estimate of $346 million. However, revenue increased by 1.8% year-on-year. Franchise rental revenue decreased 0.3% year-over-year to $103.1 million. Franchise royalties and other income increased 1.9% year over year to $60.8 million due to higher franchise comparable store sales. Franchise contributions to advertising and other services revenue edged up 0.1% year over year to $60.8 million. Company restaurant sales increased from $114.3 million to $120.1 million.

Composition discussion

Earnings at Jack in the Box stores fell 0.3% in the fiscal first quarter from 7.5% in the prior year quarter. The drop in comps was mostly due to dismal traffic, offset by an increase in average control.

Same-store sales at franchise stores increased 1.4% year-over-year, compared to 13% growth in the prior year quarter. Network-wide same-store sales increased 1.2% year over year, compared to a 12.5% ​​gain in the prior year quarter.

Operating Highlights

In the first fiscal quarter, the restaurant-level adjusted margin was 18.3%, compared to 25.5% in the prior year quarter. The decline was driven by higher food and packaging costs, wage inflation of 10.9% as well as higher utilities and maintenance and repair costs. The decline was slightly overshadowed by lower incentive compensation and menu price increases.

Food and packaging costs (as a percentage of company dining sales) rose 300 basis points to 31.3% year-over-year. Cost of goods in the quarter increased 10.5% year over year. The rise can be attributed to higher prices for beef, pork, sauces and oil.

Margin at the franchise level was 41.6% in the fiscal first quarter, compared to 41.5% in the prior year quarter.

During the quarter, selling, general and administrative expenses represented 7.4% of total revenue, compared to 6.1% in the prior year quarter.

Balance sheet

As of January 23, 2022, cash (including restricted cash) totaled $70.2 million, compared to $55.3 million as of October 3, 2021. Inventory during the quarter was $2.7 million , compared to $2.3 million as of October 3, 2021. Long-term debt (net of current maturities) totaled $1,274.8 million as of January 23, compared to $1,273.4 million at the end of January 2 October 2021.

During the first fiscal quarter, the company did not buy back any shares. On November 19, 2021, the Company’s Board of Directors announced an additional $200.0 million share buyback program which expires on November 20, 2023.

The company declared a cash dividend of 44 cents per share. The dividend will be paid on March 22, 2022 to shareholders of record on March 9, 2022.

Jack in the Box currently carries a Zacks rank #4 (sale).

You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Choice of keys

Some top-ranked stocks in the Zacks wholesale retail sector includes Genesco inc. GCO, Arcos Dorados Holdings Inc. ARCO and Tapestry, Inc. TRP.

Genesco sports a No. 1 Zacks rank. The company has a four-quarter earnings surprise of 2,739.6% on average. Shares of the company are up 29.7% over the past year.

The Zacks consensus estimate for Genesco’s 2022 sales and EPS suggests growth of 35.3% and 673.7%, respectively, from prior year period levels.

Arcos Dorados wears a Zacks Rank #2 (Buy). ARCO has long-term earnings growth of 24.7%. Shares of the company have risen 31.3% over the past year.

Zacks consensus estimate for Arcos Dorados sales and EPS in 2022 suggests growth of 33.2% and 118.1%, respectively, from prior year period levels.

Tapestry carries a Zacks rank of No. 2. The company has a trailing four-quarter earnings surprise of 28.2% on average. Shares of the company are down 5.1% over the past year.

Zacks’ consensus estimate for Tapestry sales and EPS in 2022 suggests growth of 17.6% and 22.9%, respectively, from prior year period levels.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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