Jack in the Box (JACK)

Fast-food chain Jack in the Box (NASDAQ:JACK) missed Wall Street’s revenue expectations in Q2 CY2025, with sales falling 9.8% year on year to $333 million. Its GAAP profit of $1.15 per share was in line with analysts’ consensus estimates.

Company Overview

Delighting customers since its inception in 1951, Jack in the Box (NASDAQ:JACK) is a distinctive fast-food chain known for its bold flavors, innovative menu items, and quirky marketing.

Traditional fast-food restaurants are renowned for their speed and convenience, boasting menus filled with familiar and budget-friendly items. Their reputations for on-the-go consumption make them favored destinations for individuals and families needing a quick meal. This class of restaurants, however, is fighting the perception that their meals are unhealthy and made with inferior ingredients, a battle that's especially relevant today given the consumers increasing focus on health and wellness.

Fast-food competitors include Burger King and Popeyes (owned by Restaurant Brands, NYSE:QSR), McDonald’s (NYSE:MCD), Wendy’s (NASDAQ:WEN), and Taco Bell and KFC (owned by Yum! Brands, NYSE:YUM).

A company’s long-term sales performance is one signal of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years.

With $1.49 billion in revenue over the past 12 months, Jack in the Box is a mid-sized restaurant chain, which sometimes brings disadvantages compared to larger competitors benefiting from better brand awareness and economies of scale. On the bright side, it can still flex high growth rates because it’s working from a smaller revenue base.

As you can see below, Jack in the Box’s sales grew at a decent 7.9% compounded annual growth rate over the last six years (we compare to 2019 to normalize for COVID-19 impacts) despite not opening many new restaurants.

This quarter, Jack in the Box missed Wall Street’s estimates and reported a rather uninspiring 9.8% year-on-year revenue decline, generating $333 million of revenue.

Looking ahead, sell-side analysts expect revenue to decline by 3.4% over the next 12 months, a deceleration versus the last six years. This projection is underwhelming and indicates its menu offerings will see some demand headwinds.

Number of Restaurants

A restaurant chain’s total number of dining locations often determines how much revenue it can generate.

Jack in the Box operated 2,168 locations in the latest quarter, and over the last two years, has kept its restaurant count flat while other restaurant businesses have opted for growth.

When a chain doesn’t open many new restaurants, it usually means there’s stable demand for its meals and it’s focused on improving operational efficiency to increase profitability.

Same-Store Sales

A company's restaurant base only paints one part of the picture. When demand is high, it makes sense to open more. But when demand is low, it’s prudent to close some locations and use the money in other ways. Same-store sales provides a deeper understanding of this issue because it measures organic growth at restaurants open for at least a year.

Jack in the Box’s demand has been shrinking over the last two years as its same-store sales have averaged 1.9% annual declines. This performance isn’t ideal, and we’d be concerned if Jack in the Box starts opening new restaurants to artificially boost revenue growth.

In the latest quarter, Jack in the Box’s same-store sales fell by 7.1% year on year. This decrease represents a further deceleration from its historical levels. We hope the business can get back on track.

Jack in the Box has good unit economics for a restaurant company, giving it the opportunity to invest in areas such as marketing and talent to stay competitive. As you can see below, it averaged an impressive 31.4% gross margin over the last two years. Said differently, Jack in the Box paid its suppliers $68.58 for every $100 in revenue.

Jack in the Box’s gross profit margin came in at 46.3% this quarter, up 16.9 percentage points year on year. Jack in the Box’s full-year margin has also been trending up over the past 12 months, increasing by 3.4 percentage points. If this move continues, it could suggest better unit economics due to some combination of stable to improving pricing power and input costs (such as ingredients and transportation expenses).

Jack in the Box was profitable over the last two years but held back by its large cost base. Its average operating margin of 3% was weak for a restaurant business. This result is surprising given its high gross margin as a starting point.

Analyzing the trend in its profitability, Jack in the Box’s operating margin decreased by 4.7 percentage points over the last year. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. Jack in the Box’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers.

In Q2, Jack in the Box generated an operating margin profit margin of 12.2%, up 39.9 percentage points year on year. The increase was solid, and because its operating margin rose more than its gross margin, we can infer it was more efficient with expenses such as marketing, and administrative overhead.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Sadly for Jack in the Box, its EPS declined by 20.2% annually over the last six years while its revenue grew by 7.9%. This tells us the company became less profitable on a per-share basis as it expanded due to non-fundamental factors such as interest expenses and taxes.

In Q2, Jack in the Box reported EPS at $1.15, up from negative $6.26 in the same quarter last year. This print was close to analysts’ estimates. Over the next 12 months, Wall Street is optimistic. Analysts forecast Jack in the Box’s full-year EPS of negative $3.44 will flip to positive $4.88.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Jack in the Box has shown decent cash profitability, giving it some flexibility to reinvest or return capital to investors. The company’s free cash flow margin averaged 3.1% over the last two years, slightly better than the broader restaurant sector.

Taking a step back, we can see that Jack in the Box’s margin expanded by 10.6 percentage points over the last year. This is encouraging, and we can see it became a less capital-intensive business because its free cash flow profitability rose while its operating profitability fell.

Jack in the Box’s free cash flow clocked in at $107.8 million in Q2, equivalent to a 32.4% margin. This result was good as its margin was 26.8 percentage points higher than in the same quarter last year, building on its favorable historical trend.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Jack in the Box historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 7.8%, somewhat low compared to the best restaurant companies that consistently pump out 15%+.

Debt is a tool that can boost company returns but presents risks if used irresponsibly. As long-term investors, we aim to avoid companies taking excessive advantage of this instrument because it could lead to insolvency.

Jack in the Box’s $3.13 billion of debt exceeds the $38.01 million of cash on its balance sheet. Furthermore, its 11× net-debt-to-EBITDA ratio (based on its EBITDA of $290.8 million over the last 12 months) shows the company is overleveraged.

At this level of debt, incremental borrowing becomes increasingly expensive and credit agencies could downgrade the company’s rating if profitability falls. Jack in the Box could also be backed into a corner if the market turns unexpectedly – a situation we seek to avoid as investors in high-quality companies.

We hope Jack in the Box can improve its balance sheet and remain cautious until it increases its profitability or pays down its debt.

We struggled to find many positives in these results. Its same-store sales missed and its EBITDA fell short of Wall Street’s estimates. Overall, this was a softer quarter. The stock traded down 3.3% to $18.30 immediately following the results.

Updated: November 14, 2025 at 9:51 PM EST

A common mistake we notice when investors are deciding whether to buy a stock or not is that they simply look at the latest earnings results. Business quality and valuation matter more, so we urge you to understand these dynamics as well.

Jack in the Box falls short of our quality standards. Although its revenue growth was decent over the last six years, it’s expected to deteriorate over the next 12 months and its declining EPS over the last six years makes it a less attractive asset to the public markets. And while the company’s projected EPS for the next year implies the company’s fundamentals will improve, the downside is its shrinking same-store sales tell us it will need to change its strategy to succeed.

Jack in the Box’s P/E ratio based on the next 12 months is 3.5x. While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are better investments elsewhere.

Wall Street analysts have a consensus one-year price target of $22.21 on the company (compared to the current share price of $14.96).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.