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

Jack in the Box (JACK) fourth-quarter fiscal 2021 results reflect gains from robust Franchise rental revenues.

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This story originally appeared on Zacks

Jack in the Box Inc. JACK reported mixed fourth-quarter fiscal 2021 results, wherein earnings beat the Zacks Consensus Estimate but revenues missed the same. While the bottom line surpassed the consensus mark for the sixth straight quarter, the top line missed the same after beating in the preceding seven quarters. Following the results, the company’s shares declined 2.9% on Nov 23.

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Earnings & Revenue Details

During the fiscal fourth quarter, adjusted earnings from continuing operations was $1.80 per share, which beat the Zacks Consensus Estimate of $1.74. The bottom line improved 9.8% year over year.

Quarterly revenues of $278.5 million missed the Zacks Consensus Estimate of $288 million. However, the top line increased 9% on a year-over-year basis. Franchise rental revenues increased 7.3% year over year to $84.4 million. Franchise royalties and other revenues climbed 9.8% year over year to $49.3 million owing to rise in franchise same-store sales. Meanwhile, franchise contributions to advertising and other services revenues advanced 9% year over year to $49.2 million. Company restaurant sales increased to $95.6 million from $86.8 million.

Comps Discussion

Comps at Jack in the Box’s stores decreased 4.4% in the fiscal fourth quarter against growth of 9.6% in the prior-year quarter. Decline in comps was primarily due to dismal traffic, which was partially offset by increase in average check.

Same-store sales at franchised stores increased 0.6% year over year compared with 12.4% growth in the prior-year quarter. Meanwhile, system-wide same-store sales increased 0.1% year over year compared with 12.2% gain reported in the year-ago quarter.

Operating Highlights

During the fiscal fourth quarter, restaurant-level adjusted margin came in at 20.1%, compared with 27% reported in the prior-year quarter. The was due to the take back of lower-volume franchise restaurants, higher food and packaging costs, wage inflation of 9.8%, and rise in utilities and maintenance and repair costs. The decline was offset by lower incentive compensation and menu price increases.

Food and packaging costs (as a percentage of company restaurant sales) rose 140 bps to 31% year over year. Commodity costs during the quarter increased 11.8% year over year. The increase was due to a rise in pork, beef and beverages costs.

Franchise level margin was 41.4% in the fiscal fourth quarter compared with 41.3% in the prior-year quarter.

During the quarter, selling, general and administrative expenses accounted for 7.7% of total revenues compared with 5.8% in the prior-year quarter.

Balance Sheet

As of Oct 3, 2021, cash (inclusive of restricted cash) totaled $55.3 million compared with $199.7 million as of Sep 27, 2020. Inventories during the quarter amounted to $2.3 million compared with $1.8 million as on Sep 27, 2020. Long-term debt (net of current maturities) totaled $1,273.4 million as of Oct 3 compared with $1,376.9 million at the end of Sep 27, 2020.

During the fiscal fourth quarter, the company repurchased 0.7 million shares of its common stock for $70 million. On Nov 19, 2021, the company’s board of directors announced an additional $200 million stock buy-back program that expires on Nov 20, 2023.

The company declared a cash dividend of 44 cents per share. The dividend will be paid out on Dec 23, 2021 to shareholders on record as of Dec 9, 2021.

Fiscal 2022 Outlook

General and administrative expenses are anticipated to be $92-97 million in 2022. For fiscal 2022, company-owned wage rate guidance is expected to be up 8-10% compared to 2021. For fiscal 2022, commodity guidance is estimated to be up 6-7% compared to 2021. Restaurant Level Margin is anticipated to be 20-21%.

Jack in the Box currently has a Zacks Rank #4 (Sell).

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

Peer Releases

Papa John’s International, Inc. PZZA reported robust third-quarter fiscal 2021 results, wherein both earnings and revenues surpassed the Zacks Consensus Estimate. During the fiscal third quarter, the company reported adjusted earnings of 83 cents per share, which beat the Zacks Consensus Estimate of 69 cents by 20.3%. The bottom line surged 137.1% from 35 cents in the prior-year quarter. Quarterly revenues of $512.8 million outpaced the consensus mark of $501 million by 2.3%. The top line increased 8.4% on a year-over-year basis.

Papa John’s benefited from solid comparable sales in North America, driven by strong customer retention and innovation strategies. The company witnessed a rise in company-owned restaurant revenues, franchise royalties and commissary sales. International revenues benefited from higher franchise royalties and unit growth. This Zacks Rank #2 (Buy) company’s shares have gained 41% in the past six months compared with the industry’s growth of 2.2%.

The Cheesecake Factory Incorporated CAKE reported third-quarter fiscal 2021 results, wherein both earnings and revenues missed the Zacks Consensus Estimate. In the quarter under review, adjusted earnings per share (EPS) was 65 cents, which lagged the Zacks Consensus Estimate of 70 cents. In the prior-year quarter, the company had reported an adjusted loss of 33 cents per share. This was primarily due to a rise in labor and other operating expenses.

Cheesecake Factory gained from a solid off-premise sales growth. Quarter-to-date (through Nov 2), the off-premise model contributed 28% to total sales. Shares of the company have declined 25.3% in the past six months, against the industry’s growth of 2.2%. Cheesecake Factory has a Zacks Rank #3 (Hold).

YUM! Brands, Inc. YUM reported strong third-quarter 2021 results, wherein both earnings and revenues surpassed the Zacks Consensus Estimate. Both the metrics improved year over year. During third-quarter 2021, the company’s adjusted earnings of $1.22 beat the Zacks Consensus Estimate of $1.06. In the prior-year quarter, the company had reported an adjusted earnings of $1.01. Quarterly revenues of $1,606 million outpaced the consensus mark of $1,584 million. The top line improved 11% year over year.

YUM! Brands’ results in the quarter benefited from strong digital sales, robust unit development and a diversified global business model. The company strengthened its digital capabilities with the acquisition of Dragontail, which provides AI-based integrated kitchen order management and delivery technologies. The initiative paves the path for strengthening store operations and enhancing customer experience. During the third quarter, it reported digital sales of more than $5 billion. Shares of this Zacks Rank #3 company have gained 5.8% in the past six months.



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