10-Q: Jack in the Box Q2 2026 Earnings Decline Amidst Sales Dip

Jack in the Box Inc. reported a decrease in net earnings for the second quarter of fiscal year 2026, with revenues impacted by lower same-store sales and a reduction in franchise operations.

Summary

• Jack in the Box Inc. reported net earnings of $10.2 million for the quarter ended April 12, 2026, a significant decrease from the net loss of $142.2 million in the same period last year, which was heavily impacted by the Del Taco sale.
• Total revenues for the quarter were $254.3 million, down from $265.7 million in the prior year's quarter.
• Company-operated restaurant sales decreased by 0.4% to $94.7 million, while same-store sales for company-operated restaurants declined by 2.8%.
• Franchise rental revenues decreased by 7.5% to $72.1 million, and franchise royalties and other revenue fell by 5.9% to $43.0 million.
• The company prepaid $105.0 million of its Series 2019-1 Class A-2-II Notes in January 2026, utilizing proceeds from the Del Taco sale.
• As of April 12, 2026, the company had $69.4 million in cash and restricted cash and $95.3 million in available borrowing capacity under its revolving credit facility.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this as a negative sentiment due to declining revenues, decreased same-store sales, and increased operating costs, despite the improvement in net earnings driven by the absence of prior year's discontinued operations losses.

Positives

• Net earnings improved significantly to $10.2 million from a net loss of $142.2 million in the prior year's quarter, largely due to the absence of the large loss from discontinued operations.
• The company has $175.0 million remaining under its share repurchase program.
• The company had $95.3 million in available borrowing capacity under its revolving credit facility.
• The company prepaid $105.0 million of its debt, demonstrating a commitment to deleveraging.

Negatives

• Total revenues decreased by 4.2% to $254.3 million for the quarter.
• Company-operated restaurant sales decreased by 0.4% to $94.7 million.
• Same-store sales for company-operated restaurants decreased by 2.8% in the quarter.
• Franchise rental revenues decreased by 7.5% to $72.1 million.
• Franchise royalties and other revenue decreased by 5.9% to $43.0 million.
• Franchise contributions for advertising and other services revenues decreased by 5.4% to $44.4 million.
• Food and packaging costs as a percentage of company restaurant sales increased by 1.1% in the quarter due to commodity inflation and unfavorable menu mix.
• Payroll and employee benefit costs as a percentage of company restaurant sales increased by 1.8% in the quarter.
• Other operating expenses, net, increased by $1.2 million in the quarter, largely due to proxy contest fees and consulting fees.

Risks

• Commodity inflation impacting food and packaging costs.
• Increased labor costs and potential for unionization activities or labor disputes.
• Changes in consumer confidence and general economic conditions impacting financial results.
• Intense competition in the food service industry.
• Negative publicity or food safety concerns impacting reputation and demand.
• Potential for severe weather, natural disasters, or civil unrest affecting operations.
• Cybersecurity breaches and data security incidents.
• Dependence on information technology and digital service providers.
• The company has a significant amount of debt outstanding.
• Potential for disagreements with key stakeholders, such as franchisees.

Future Outlook

The company expects that cash flows from operations, combined with its securitized financing facility, will be sufficient to meet its capital expenditure, working capital, and debt service requirements for at least the next twelve months and the foreseeable future. The company is also planning to use excess COLI funding and cash on hand to prepay approximately $99.0 million of its 2019-1 Class A-2-II Notes in the third quarter of 2026.

Management Comments

• The company announced on April 23, 2025, that it will discontinue its dividend effective immediately and direct a majority of those funds toward leverage reduction.
• The company's principal business consists of developing, operating and franchising its Jack in the Box restaurant brands. Following the sale of Del Taco in December 2025, the Company is considered to have only one reportable operating segment.

Industry Context

StockSavvy.ai notes that the decline in same-store sales and overall revenue for Jack in the Box is consistent with broader trends in the quick-service restaurant sector, which is facing challenges from commodity inflation, labor cost pressures, and evolving consumer preferences. The company's strategic focus on debt reduction and operational efficiency is a common response to these industry headwinds.

Comparison to Industry Standards

• Jack in the Box's same-store sales decline of 2.8% for company-operated restaurants and 3.9% for franchise restaurants in the quarter is generally underperforming compared to the broader quick-service restaurant industry average, which has shown more resilience in some segments.
• The increase in food and packaging costs as a percentage of sales (1.1% for the quarter) reflects industry-wide commodity inflation, impacting major players like McDonald's and Starbucks, though the specific impact varies based on purchasing power and menu mix.
• Labor cost increases as a percentage of sales (1.8% for the quarter) are also a common challenge across the industry, with companies like Chipotle and Yum! Brands also reporting similar pressures due to minimum wage hikes and competition for talent.

Management Changes

Corporate Governance

Legal Proceedings

• Gessele v. Jack in the Box Inc.: Litigation concerning wage and hour claims, with a jury award of $6.4 million in 2022, and ongoing appellate proceedings. As of April 12, 2026, $10.5 million has been accrued for the verdict, interest, and fees.
• J&D Restaurant Group: Litigation concerning franchise agreement termination, where a jury awarded $8.0 million in damages in 2023, which was later overturned by the court. The appellate court affirmed the trial court's decision, and the plaintiff's petition for review by the Texas Supreme Court was denied.
• Del Taco Sale Indemnification: Potential indemnification for certain losses related to the Del Taco sale, capped at $10.0 million within one year of the December 22, 2025 closing date.
• Other routine litigation from employees, customers, franchisees, vendors, landlords, and shareholders.

Stakeholder Impact

• Shareholders: The company has discontinued dividends and is focusing on debt reduction, which could lead to improved financial stability but reduced immediate income for dividend-seeking investors. The stock repurchase program remains authorized.
• Employees: Increased payroll and employee benefit costs as a percentage of sales may impact profitability. Management changes could lead to shifts in company culture and strategy.
• Franchisees: Decreased franchise rental revenues and royalties reflect lower franchise sales, potentially indicating challenges for franchisees. Increased bad debt expense in franchise support costs suggests some franchisee financial strain.
• Creditors: The company's focus on debt reduction and prepayment of notes is positive for creditors, indicating a commitment to managing leverage.

Next Steps

• The company plans to use excess COLI funding and cash on hand to prepay approximately $99.0 million of the 2019-1 Class A-2-II Notes in the third quarter of 2026.
• The company will continue to direct a majority of funds toward debt reductions following the discontinuation of dividends.

Key Dates

Recommendation

While the company has improved net earnings compared to the prior year's loss, this is largely due to the absence of discontinued operations charges. Declining revenues, negative same-store sales, and rising operating costs present significant headwinds. The focus on debt reduction is positive, but the operational challenges suggest a 'hold' rating until a clear turnaround in sales and profitability is demonstrated.

Keywords

Jack in the Box, 10-Q, Quarterly Report, Restaurant Sales, Franchise Revenue, Same-Store Sales, Financial Results, Del Taco Sale, Debt Reduction, Commodity Inflation