Macro Challenges Risk Jack In The Box's Unit Growth, Says Analyst

  • Credit Suisse analyst Lauren Silberman reiterated an Underperform rating on the shares of Jack In The Box JACK and lowered the price target from $84 to $73.
  • The analyst said the company demonstrated solid Q4 same-store sales, including Jack in the Box 4% & Del Taco 5.2%, while unit growth came in below expectations with a total of 29 net closures.
  • JACK guided FY23 EPS to $5.25-5.65 (prior consensus $6.56), with the miss in part driven by an increase in tech investments.
  • The company guided to positive net unit growth in FY23 (implies growth of <1%). While encouraged by the increase in the development pipeline, the analyst views the acceleration to ~4% by FY25 as a show-me story.
  • The analyst believes current execution will be the near-term focus given challenges in the consumer environment, macro headwinds adding risk to unit growth, and noise around closures & Del Taco refranchising making it difficult to model the run-rate earnings power of the business.
  • The analyst is looking for better visibility into the timing of a meaningful acceleration in unit growth and understanding of the long-term model before getting more constructive.
  • JACK expects FY23 same-store sales in the Low Single Digit, supported by continued execution against its hook & build and barbell strategies, benefits from improvements in operating hours, further reopening of dining rooms and digital.
  • Price Action: JACK shares are trading higher by 1.33% at $72.19 on the last check Wednesday.
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