Executives at Jack In The Box (NASDAQ:JACK) said first-quarter fiscal 2026 results were “choppy” but generally in line with internal expectations, as the company works through a multi-step turnaround focused on simplifying operations, improving the guest experience, and reducing leverage following the sale of Del Taco.
Management highlights simplification and early sales improvements
Chief Executive Officer Lance Tucker opened the call by pointing to the company’s completed sale of Del Taco in December and a related debt paydown as key steps in its “Jack OnTrack” plan. With the separation largely complete, Tucker said the team is now fully refocused on strengthening the Jack in the Box brand and executing the remaining elements of the plan.
While acknowledging consumers remain cautious, Tucker said the company intends to continue value-oriented promotions while also using technology to support a “barbell strategy” that includes add-ons and upsells. He reiterated that management expects “steady improvement” in same-store sales over the remainder of fiscal 2026, consistent with the company’s reaffirmed guidance.
First-quarter results: same-store sales fell and margins compressed
Chief Financial Officer Dawn Hooper said the company’s first-quarter same-store sales declined 6.7%, including a 7.0% decline at franchise locations and a 4.7% decline at company-owned restaurants. Hooper attributed the decrease to declines in transactions and sales mix, partially offset by price increases. Del Taco results were excluded from continuing operations.
Restaurant-level margin fell to 16.1% from 23.2% a year earlier. Hooper said food and packaging costs rose to 29.7% of sales, up 380 basis points, driven by 7.1% commodity inflation, the rollover of a prior-year beverage benefit, and a change in restaurant mix. Labor costs increased to 35.3% of sales, up 200 basis points, primarily due to restaurant mix related to the Chicago market. Occupancy and other costs increased 120 basis points, driven by higher utilities and other operating expenses.
Franchise-level margin was $84.1 million, or 38.6% of franchise revenues, compared with $97.1 million, or 40.9%, in the prior-year period, largely due to lower sales and a smaller restaurant base.
System development was negative in the quarter, with six openings and 14 closures. Hooper said SG&A declined to $37.0 million from $41.2 million, primarily due to company-owned life insurance (COLI) market fluctuations and transition services agreement (TSA) income, partially offset by higher IT expense and digital advertising. The company received about $0.9 million of TSA income in the quarter and expects TSAs to be largely completed by the end of the second quarter, with full-year TSA income “nominal,” at no more than around $2 million.
Other operating expenses, net, were $8.1 million and included proxy contest fees and professional fees tied to a tax refund settlement, partially offset by gains on real estate sales.
Earnings from continuing operations were $14.4 million, compared with $31.0 million a year ago. GAAP diluted EPS from continuing operations was $0.75, compared with $1.61 in the prior-year quarter. Operating EPS, which includes adjustments, was $1.00 versus $1.86. Consolidated adjusted EBITDA was $68.2 million, down from $88.8 million, primarily due to sales deleverage.
OnTrack: debt reduction, closures, and real estate sales
Hooper outlined the company’s progress on “Jack OnTrack,” which she described as focused on strengthening the balance sheet and positioning the company for sustainable growth. Key updates included:
- Debt paydown: The company made a $105 million partial prepayment on its August 2026 tranche. Total debt at quarter-end was $1.6 billion, and net debt to adjusted EBITDA leverage was 6.5x (excluding Del Taco’s historical adjusted EBITDA).
- Additional debt target: Management reiterated its commitment to pay down an additional $200 million over the course of the OnTrack plan.
- Real estate: The company generated $10.9 million in proceeds from real estate sales in the quarter, with about $6.3 million in gains. Hooper said management expects to generate $50 million to $60 million of real estate proceeds by the end of fiscal 2026, with proceeds and cash on hand intended for debt reduction.
- Closures: Franchisees closed 12 underperforming restaurants in the quarter. Hooper said the company has generally seen about a 30% sales benefit to nearby restaurants from closures, though the pace has been slower than expected due to lease and sales-transfer considerations.
Hooper also said the company is “thoughtfully assessing” refinancing options for upcoming maturities and expects it is “likely” to be in the market in the coming months.
Q&A: weather, Chicago, franchise gap, value competition, and remodel strategy
During Q&A, Tucker said performance improved into the second quarter and that, excluding weather, the company was running at “low single digits” in same-store sales declines. He said a winter storm had a noticeable impact in Texas and the Midwest and estimated the storm could have a roughly 60 to 70 basis point impact on the quarter, with a larger impact when looking at the affected month.
On Chicago, Tucker said the company opened eight restaurants in under three months and is still “dialing in the P&L” in a tough labor market. He said the company has not yet turned on 24-hour operations, digital, or the full menu in that market, citing ongoing operational issues, but expects improvement “in the coming months.” Hooper added the company had anticipated continued margin compression in Chicago within its guidance, particularly for the first quarter.
Asked about the comp gap between company and franchise restaurants, Tucker attributed much of the difference to promotion participation in digital channels, saying company stores are far more consistent about opting into digital offers, while franchisees are more selective.
On value competition, Tucker and Chief Customer and Digital Officer Ryan Ostrom said the company plans to maintain consistent value offers while leaning into differentiation through innovation and “distinctive and ownable” promotions. Ostrom pointed to the brand’s “abundance value” positioning around Munchie Meals and highlighted disruptive taco promotions tied to the 75th anniversary, including a monthly $0.75 taco offer, as well as an upcoming $0.75 Jumbo Jack promotion.
On breakfast, management said performance has been relatively consistent with other dayparts, with late night showing more gains. Executives emphasized the brand’s all-day breakfast as a core element of the concept.
On restaurant modernization, Tucker described the current effort as a “mini refresh” aimed at curb appeal—such as paint, parking lot striping and sealing, landscaping, and drive path cleanup—at a low cost. He estimated costs under $20,000 per restaurant, and potentially under $10,000 for franchisees. Tucker said the company’s longer-term goal is to establish a full reimage program toward the end of the year and indicated corporate would provide “meaningful” support for franchisees, referencing a prior remodel program where corporate contributions were “in the 35% neighborhood,” though he cautioned corporate would not fund remodels entirely.
Commodity outlook and consumer sensitivity
Hooper said the company’s commodity inflation outlook remains consistent with guidance issued in November, which called for mid-single-digit inflation for the year. She said beef has been the most impactful category, with beef inflation in the double digits in the first quarter, and said the company expects the impact to moderate through fiscal 2026. Tucker added that, based on forecasts he has seen, management does not expect beef to become a tailwind over the next 12 to 18 months.
Separately, Tucker said the company has not seen meaningful improvement in demand trends among low-income and Hispanic consumer segments, noting only slight improvement without significant change.
Management closed by reiterating a focus on simplifying the business, improving operations and marketing execution, and reducing leverage, while expecting sales trends to improve as fiscal 2026 progresses.
About Jack In The Box (NASDAQ:JACK)
Jack in the Box (NASDAQ: JACK) is a publicly traded quick-service restaurant company best known for its Jack in the Box brand of fast-food restaurants. Founded in 1951 by Robert O. Peterson and headquartered in San Diego, California, the company has operated for decades as a franchisor and operator of drive-thru and dine-in restaurants. Its business model combines company-owned locations with franchise arrangements, and the company focuses on building brand recognition through menu innovation, marketing and service convenience.
The company’s core offerings center on a broad fast-food menu that includes hamburgers (notably the Jumbo Jack), tacos, breakfast items, sandwiches, salads, sides and specialty limited-time items.
