Jack in the Box to sell real estate, end dividend to reduce debt

SAN DIEGO - Jack in the Box Inc. (NASDAQ: JACK), whose stock has declined over 54% in the past year according to InvestingPro data, has unveiled a strategic initiative, dubbed the JACK on Track plan, aimed at enhancing financial performance and simplifying its business model. The company announced the discontinuation of its dividend payout - ending a 12-year streak of consistent dividend payments - and plans to sell selected real estate assets to accelerate cash flow and reduce debt. These moves are part of a broader effort to transition to an asset-light model and set the stage for sustainable growth, particularly important given the company’s current debt-to-capital ratio of 87%.

In a recent statement, CEO Lance Tucker, who took the helm on March 31, outlined the company’s focus on streamlining operations, including the closure of 150-200 underperforming restaurants by the end of 2025. Tucker emphasized the importance of simplifying the Jack in the Box business model and improving shareholder returns. InvestingPro analysis indicates the company maintains a FAIR financial health rating, with particularly strong scores in relative value metrics, suggesting potential upside from current levels. Subscribers can access 12 additional ProTips and comprehensive analysis through InvestingPro’s detailed research reports.

The company also revealed its intention to explore strategic alternatives for Del Taco, which may include the sale of the brand. BofA Securities has been engaged to assist in this process.

As part of its capital allocation strategy, Jack in the Box will significantly reduce its capital expenditures on new company-owned restaurant development from 2026, though it will continue to invest in restaurant reimages and digital capabilities to drive growth through its digital sales channels.

The restaurant closure program is expected to result in the shutdown of 80-120 locations by December 31, 2025, with additional closures following based on franchise agreement terminations. This does not account for the anticipated 1.5% to 2.0% system unit closures for fiscal year 2025 and an ongoing annual closure rate of approximately 1% starting in fiscal year 2026.

For fiscal year 2025, Jack in the Box projects capital expenditures between $100 million and $105 million, share repurchases of approximately $5 million to $15 million, an adjusted operating earnings per share (EPS) tax rate of around 26%, and an adjusted EBITDA of $282 million to $292 million, excluding potential late fiscal year impacts from the JACK on Track initiatives. Based on InvestingPro’s Fair Value analysis, the stock currently appears undervalued, with analysts setting price targets ranging from $24 to $65 per share. The company’s strong free cash flow yield and expected return to profitability this year suggest potential for recovery, according to InvestingPro’s comprehensive analysis available in their Pro Research Report.

The company has pre-announced its second-quarter results for fiscal year 2025, reporting a same-store sales decline of 4.4% for Jack in the Box and 3.6% for Del Taco, with adjusted EBITDA between $66 million and $68 million. The quarter also saw 5 new restaurant openings and 12 closures for Jack in the Box, and 6 openings and 4 closures for Del Taco.

These preliminary second-quarter results are subject to change upon completion of standard closing procedures, and the company does not plan to update this information before the final earnings release and conference call scheduled for May 14, 2025.

This article is based on a press release statement from Jack in the Box Inc.

In other recent news, Jack in the Box reported its first-quarter earnings for 2025, which exceeded expectations, despite a challenging macroeconomic environment. RBC Capital Markets noted the company’s earnings per share surpassed consensus estimates, attributing this to one-time cost savings and reaffirming its full-year guidance. Similarly, Jefferies highlighted that Jack in the Box’s same-store sales performed better than anticipated, although the company faces uncertainty with the upcoming departure of CEO Darin Harris. Meanwhile, Truist Securities maintained a Buy rating but lowered its price target to $51, citing the CEO’s resignation and recent financial results. Stifel also revised its outlook, reducing the price target to $35, due to anticipated weak comparable sales trends.

Shareholders of Jack in the Box recently approved board members and executive compensation, indicating strong confidence in the company’s leadership. The appointment of KPMG LLP as the independent registered public accountants was ratified with significant support. RBC Capital and Jefferies both maintained positive ratings on the stock, with RBC setting a new price target of $45 and Jefferies at $41. These developments reflect a cautious but optimistic view of Jack in the Box’s future performance amidst industry-wide challenges.

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