Jack In The Box (NASDAQ:JACK) reported lower fiscal second-quarter earnings and same-store sales, while management said trends improved through the quarter and into the current period as the burger chain leans on value offers, premium menu innovation and operational changes.
The company’s fiscal Q2 2026 call also marked the first public remarks from Mark King as interim chief executive officer. King said the board remains committed to the company’s “Jack on Track” plan, which is aimed at simplifying the business, improving performance and strengthening the balance sheet.
“As interim CEO, my focus will be on accelerating the Jack on Track initiatives already underway,” King said. He added that he has asked the leadership team to operate with “a renewed sense of urgency” to improve results and enhance shareholder value.
Same-store sales decline, but trends improve
Chief Financial Officer Dawn Hooper said Jack in the Box same-store sales fell 3.8% in the quarter. Franchise restaurant same-store sales declined 3.9%, while company-owned same-store sales decreased 2.8%. Hooper said the results were primarily driven by lower transactions, partially offset by menu price increases.
Management pointed to improved momentum as the quarter progressed. Hooper said the company saw better transaction trends from its “Much Better Deals” value platform, while premium Smashed Jack sliders helped support check growth. The sliders were offered in multiple formats, including as a one-piece add-on, a three-piece combo, a Munchie Meal and a Party Pack.
Hooper said the company also improved its offer lineup across first-party and third-party digital channels, which drove “higher, more profitable checks.” Quarter to date, she said same-store sales are “approaching flat.”
In response to analyst questions, Hooper said the company expects sales momentum to continue in the back half of the year, with the fourth quarter expected to be the strongest period. She cited continued value messaging, a FIFA World Cup-related opportunity, the return of Jibbitz and a Hot Ones collaboration featuring two new Hot Ones Munchie Meals.
Margins pressured by commodities and sales deleverage
Restaurant-level margin fell to 16.4% in Q2 from 19.6% a year earlier. Food and packaging costs rose 110 basis points as a percentage of sales to 28.9%, driven by 5% commodity inflation. Hooper said beef costs remain elevated and are expected to stay in the double digits through Q3 before moderating in Q4, with deflation in other categories such as dairy expected to offset some pressure.
Labor costs increased 180 basis points as a percentage of sales to 35.6%, which Hooper attributed primarily to a change in restaurant mix. Occupancy and other costs increased 40 basis points due mainly to sales deleverage and higher rent.
Franchise-level margin was $60.5 million, or 37.9% of franchise revenue, compared with $68.3 million, or 40%, a year earlier. The decline was driven by lower sales, reduced rent revenue and royalties, fewer restaurants and lower lease termination fees.
Second-quarter SG&A was $26.4 million, or 10.4% of revenue, compared with $28.2 million, or 10.6%, a year earlier. Hooper said the decline reflected market fluctuations in corporate-owned life insurance policies and lower legal costs, partially offset by higher stock-based compensation due to prior-year forfeitures.
Earnings and adjusted EBITDA decline
Earnings from continuing operations were $12.5 million, down from $20.7 million in the prior-year period. GAAP diluted earnings per share from continuing operations were $0.65, compared with $1.09 a year earlier. Operating earnings per share were $0.76, down from $1.25.
Adjusted EBITDA was $51.3 million, compared with $61.5 million in the prior year. Hooper said the decline was due primarily to lower sales performance and restaurant closures.
Debt reduction remains a focus
Hooper said Jack in the Box remains focused on debt reduction as part of Jack on Track. Total debt at quarter-end was $1.6 billion, and the company’s net debt-to-adjusted EBITDA leverage ratio was 6.9 times.
The company is in the process of withdrawing about $71 million of excess corporate-owned life insurance funding. Hooper said that cash, along with cash on hand, is expected to be used to prepay approximately $99 million of the August 2026 tranche early in Q3. Including that prepayment, the company’s pro forma leverage ratio would be about 6.2 times.
Hooper also said the company is actively pursuing refinancing of its August 2026 and February 2027 tranches and expects to provide an update later this summer.
Jack in the Box has generated $14.7 million in real estate sale proceeds year to date and expects to sell additional real estate for proceeds of about $35 million to $45 million by the end of the fiscal year. Those proceeds, along with cash on hand, are expected to be used to pay down debt.
Closures and refreshes remain part of turnaround plan
Management said restaurant closures are expected to accelerate in the back half of the year. Hooper said franchisees have shown increased interest in closing underperforming restaurants earlier than their franchise agreement expirations as they see a clearer path to recapturing sales. She said the company is seeing an average sales transfer benefit of about 30% from closures and is dedicating more resources to working with landlords on lease exits.
King said helping franchisees improve profitability is a central focus. He pointed to simplifying the menu and back-of-house operations as short-term opportunities to improve labor efficiency and profitability.
The company is also accelerating “mini refreshes” for company and franchise restaurants. Hooper described the refreshes as lower-cost updates, including paint, parking lot resurfacing and landscaping. She said the company is seeing low-single-digit same-store sales benefits after the work is completed.
For fiscal 2026, Jack in the Box now expects same-store sales to decline in the low single digits. The company expects restaurant-level margin of approximately 17%, franchise-level margin of $265 million to $275 million, SG&A of $115 million to $125 million excluding corporate-owned life insurance gains or losses, and adjusted EBITDA of $225 million to $235 million.
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.
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