Jack in the Box (JACK) Misses Q4 EPS by 2c, Revenue Beats, Offers Guidance
Jack in the Box (NASDAQ: JACK) reported Q4 EPS of $1.33, $0.02 worse than the analyst estimate of $1.35. Revenue for the quarter came in at $402.8 million versus the consensus estimate of $391.57 million.
Company-wide Guidance:
- FY 2023 CapEx & Other Investments Guidance of $75-90 million
- Capital expenditures (located within cash flows from investing activities)
- Franchise tenant improvement allowances and incentives (located within cash flows from operating activities)
- FY 2023 SG&A Guidance of $160-170 million
- Excludes net COLI gains/losses, and now includes selling/advertising expense
- Synergies from the Del Taco acquisition are not all direct reductions to expense, and appear in other areas of the P&L and margins, including store-level franchisee margins
- Areas of cost mitigation include Restaurant Level Margin, Franchise Level Margin, Purchasing, Reduced Commodity Inflation, Marketing Activity and Spend
- Does not include anticipated Del Taco refranchising savings
- FY 2023 Company-owned Commodity Guidance up 9-11% vs. 2022
- FY 2023 Company-owned Wage Rate Guidance up 3-6% vs. 2022
- FY 2023 Operating EPS Guidance of $5.25-5.65, includes Unique and One-time Items of Note
(Consensus sees FY23 EPS of $6.59, may not compare)
- $0.08 negative impact associated with the reduction in rental revenue from real estate sales (additional detail below in Real Estate Sales section)
- $0.22 negative impact associated with store-level technology investments (additional detail below in Franchise Level Margin section)
- As mentioned within Capital Allocation section, the company plans to execute up to $50 million in share repurchases in FY 2023
- Excludes any dilutive impact from refranchising Del Taco restaurants, and we will provide updates throughout the year as this initiative progresses
- Further Detail on Real Estate Sales
- Jack in the Box has identified real estate assets in its portfolio that, due to current cap rates, can be monetized at more attractive valuations than the current trading multiple. The company can use the net proceeds from these real estate transactions to pay down debt, provide additional liquidity or other corporate purposes including investments in growth initiatives and potential share repurchases
- For planned real estate sales of franchised properties, there is a reduction in rental revenue partially offset by a modest reduction in occupancy expense
- Given trends in interest rates, this is a limited opportunity for the company in the near term
- In total, there is an anticipated $2.2 million impact on adjusted EBITDA and an expected $0.08 negative impact on Operating EPS associated with the reduction in rental revenue
- Further Detail on Del Taco Refranchising
- Cypress Group is currently assisting with refranchising of Del Taco locations with three main intentions. First, to create a company-wide asset-light model that will benefit from mitigating exposure to macroeconomic pressures; second, to generate incremental development agreements throughout the refranchising process that provide for a more robust unit growth pipeline than otherwise achievable; and third, a more efficient G&A structure
- Our objective is to be asset light as we navigate market forces in the near term – and we will adjust the rate, pace and sequence of refranchising efforts to balance impact to earnings, as we await accelerated new unit openings from incremental development agreements and natural G&A reductions
- We will provide updates throughout 2023, and plan to execute deals with existing Jack in the Box franchisees early in the year – as well as assess further deals patiently to ensure we maximize development potential as well as transaction value
For earnings history and earnings-related data on Jack in the Box (JACK) click here.