Jack in the Box moves toward 'less capital-intensive' business model

Jack in the Box Q1 financial results for the period ending Jan. 21 were in line with what leadership expected, according to Chairman and CEO Lenny Comma, who said the business is working hard to become a "less capital-intensive" company. Likewise, the financials for the period indicate that the new U.S. tax measures — enacted Dec. 22 — will have significant effect on the brand's results going forward, since the federal statutory rate essentially dropped from 35 percent to 21 percent starting Jan. 1. 

Jack in the Box leadership said in a news release that since their fiscal year ends Sept. 30, they are phasing in the tax rate reduction, resulting in a blended statutory federal tax rate of 24.5 percent for the fiscal year ending Sept. 30. But the tax law change resulted in a one-time noncash increase to the provision for income taxes of $30.6 million, or $1.03 per diluted share, in the first quarter of fiscal 2018. The adjustment at Jack in the Box allows for the revaluation of deferred tax assets and liabilities at the lower rates.

"We remain focused on regaining momentum in a highly competitive environment through several key initiatives, including a greater emphasis on value, while continuing to introduce innovative new products like the Ribeye Burger and our recently launched Food Truck series of sandwiches," Comma said in the release. 

"During the first quarter, we refranchised 22 Jack in the Box restaurants. We currently have signed nonbinding letters of intent with franchisees to sell 58 additional restaurants, and continue to anticipate the Jack in the Box franchise mix to reach approximately 95 percent by the end of the fiscal year.

"We are working with our advisors to adjust our capital structure to reflect a less capital-intensive business model, and we remain committed to returning cash to shareholders."

Q1 highlights: 

  • Operating earnings per share rose to $1.23 in Q1 2018 from $1.07 the previous year's quarter. 
  • Continuing operations earnings dropped from $34.5 million ($1.06 per diluted share) last year to $12.9 million or $0.43 per diluted share this Q1.
  • Adjusted EBITDA fell from $90.6 million in 2017 Q1 to $85.4 million in this fiscal year.

Jack in the Box system same-store sales decreased 0.2 percent for the quarter and lagged the QSR sandwich segment by 2 percentage points for the comparable period, according to The NPD Group's SalesTrack Weekly for the 16-week time period ended January 21, 2018. Company same-store sales increased 0.2 percent in the first quarter driven by average check growth of 2.6 percent, partially offset by a 2.4 percent decrease in transactions.


Topics: Business Strategy and Profitability, Financial News


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