JACK — Jack in the Box Inc.

Summary of Jack in the Box Inc. Q1 2026 Earnings Call

1. Key Financial Results and Metrics:

• Same-store Sales: Decreased by 6.7% overall, with franchise restaurants down 7% and company-owned locations down 4.7%.
• Restaurant-Level Margin: Dropped to 16.1% from 23.2% year-over-year.
• Food and Packaging Costs: Increased to 29.7%, up 380 basis points due to 7.1% commodity inflation.
• Labor Costs: Rose to 35.3%, up 200 basis points, particularly impacted by the Chicago market.
• Franchise-Level Margin: $84.1 million (38.6% of franchise revenues), down from $97.1 million (40.9%).
• Earnings from Continuing Operations: $14.4 million, compared to $31.0 million in Q1 2025.
• GAAP Diluted EPS: $0.75, down from $1.61 year-over-year.
• Consolidated Adjusted EBITDA: $68.2 million, down from $88.8 million in the prior year.
• Total Debt: $1.6 billion, with a net debt to adjusted EBITDA leverage ratio of 6.5x.

2. Strategic Updates and Business Highlights:

• Del Taco Sale: Completed in December 2025, allowing for significant debt reduction.
• 75th Anniversary Initiatives: Positive customer engagement through marketing campaigns and product launches, including the Chicken Supreme Munchie Meal and collectible items.
• Operational Improvements: Enhanced training and support for franchisees, focusing on customer experience and operational efficiency.
• Restaurant Refreshes: Low-cost cosmetic upgrades have shown modest sales lifts in test locations.
• Technology Investments: New POS and back-of-house systems are expected to improve operational efficiency and profitability.

3. Forward Guidance and Outlook:

• Sales Improvement Expectation: Management anticipates steady improvement in top-line sales throughout 2026, with ongoing efforts to simplify operations and enhance customer experience.
• Debt Reduction Commitment: Plans to pay down an additional $200 million in debt as part of the Jack on Track plan.
• Capital Expenditures: Expected to remain focused on technology and restaurant modernization, with Q1 expenditures at $23.2 million.

4. Bad News, Challenges, or Points of Concern:

• Declining Same-store Sales: The significant drop in same-store sales is a primary concern, particularly in light of inflationary pressures on food and labor costs.
• Franchisee Performance: Disparities in performance between company-owned and franchise locations, with franchisees facing tighter margins due to inflation and sales declines.
• Labor Market Challenges: Ongoing difficulties in the Chicago market, impacting operational efficiency and profitability.
• Commodity Inflation: Continued pressure from high commodity prices, particularly beef, which is expected to moderate but remains a concern.

5. Notable Q&A Insights:

• Sales Trends: January showed improvement, with same-store sales trending better than Q1, despite weather-related impacts.
• Franchisee Support: While franchisees have good AUVs, there are no blanket assistance measures being implemented; however, targeted support is being considered for struggling locations.
• Breakfast Performance: Breakfast remains consistent and is a core part of the brand, with no significant changes noted compared to other dayparts.
• California Market Challenges: The high concentration of restaurants in California presents additional headwinds, particularly regarding labor and sales performance.

Overall, Jack in the Box Inc. is navigating a challenging environment with a focus on operational improvements and strategic simplification, while facing significant pressures from inflation and declining sales metrics.