Jack in the Box Inc. JACK has disappointed investors with its stock down 44.3% year to date (YTD). On Thursday, shares closed at $45.46, significantly below the 52-week high of $86.20 but still above the 52-week low of $40.84.

In the same period, the broader market has performed better with the industry and the S&P 500’s growth of 4.9% and 20%, respectively. The company’s share price performance also lagged behind industry players, including Restaurant Brands International Inc. QSR, The Wendy's Company WEN and Papa John's International, Inc. PZZA.

Price Performance

Image Source: Zacks Investment Research

In addition, the Zacks Consensus Estimate for Jack in the Box's earnings per share has been revised downward. In the past 30 days, analysts have reduced their estimates for the current and the next year by 0.3% to $6.22 and 0.3% to $6.65 per share, respectively.

What’s Hurting JACK?

Dismal same-store sales continue to hurt the company’s performance. In third-quarter fiscal 2024, systemwide same-store sales fell 2.2% against the 7.9% growth reported in the year-ago quarter. Reduced transactions and an unfavorable mix shift caused the downside. Same-store sales at franchised stores declined 2.4% against the growth of 8% reported in the prior-year quarter. The company remains cautious of the uncertain macro environment.

High costs are also hurting the company’s margin. In third-quarter fiscal 2024, the restaurant level margin contracted 80 basis points (bps) year over year to 21%, due to increased labor, utilities and technology support costs. Labor cost (as a percentage of sales) during the reporting quarter increased 200 bps year over year to 32.4%. The upside was primarily caused by wage increases to comply with California's new minimum wage law.

Occupancy and other operating expenses rose 60 bps year over year to 19.4%, primarily due to higher utility and technological costs. The company anticipates the inflationary pressures to continue for some time.

The industry-wide competition for value-conscious consumers, particularly among lower-income segments, contributed to JACK's challenges. The company struggled to differentiate its value propositions in a crowded market, resulting in weaker performance, particularly in the low-income demographic.

JACK provided a cautious outlook, anticipating full-year same-store sales to decline approximately 1% and restaurant-level margins to hover around 22%. For Del Taco, same-store sales are projected to drop 1.5%, with margins at 14%. The company aims to recover through strategic initiatives, including menu innovation and targeted value offerings. However, with continued consumer pressure, especially from lower-income segments, and rising labor costs challenges remain.