Jack in the Box on Wednesday said that its same-store sales fell 7.1% last quarter. Customers visited less often and spent less when they did visit.
It was the fast-food chain’s worst performance on the key metric in 15 years, worse even than the pandemic.
Executives with the San Diego company blamed a confluence of issues hitting all at once, notably a low-income consumer that has slowed its fast-food spending and a Hispanic market that’s slowing it even further.
“There were several challenges we had to contend with in the quarter,” CEO Lance Tucker told analysts, according to a transcript on the financial services site AlphaSense. “The macro environment is very difficult, and consumers remain cautious. Jack in the Box significantly over-indexes with Hispanic guests, who, especially in our core markets, face uncertainty and have pulled back on their spending.
“This issue is having an outsized impact on our sales.”
Tucker also mentioned difficult comparisons, noting that the company ran a Smashed Jack promotion a year ago that led to elevated checks, as did price increases in advance of the $20 California fast-food wage.
To fix this, the company has reintroduced a Bonus Jack Combo, which features a Bonus Jack sandwich, fries and a drink for $6. It is pushing its Munchie Meals to bolster late-night business.
Jack in the Box is also investing $5.5 million in incremental marketing in the current sales performance.
The company has seen some progress. Sales in the first several weeks of the current quarter were “difficult.” But Tucker said that “trends have looked much improved” over the past couple of weeks.
Still, Jack in the Box’s weak results come during a tumultuous time for the chain, which changed CEOs at the start of the year and put Del Taco on the market. The company is closing 80 to 120 underperforming locations this year, and 200 total, in a bid to improve operator profitability and spur more unit growth.
Last quarter’s sales results were unlikely to help much on that front. With weaker sales, restaurant-level profit margins at company stores took a big hit, falling 310 basis points to 17.9% of sales, from 21% a year ago.
Labor costs have hit the chain hard. Company restaurants are spending 34.5% of revenues on labor, due to an adjustment in California’s payroll tax and 1.5% wage inflation.
Quick-service chains have struggled over the past two-plus years, due in part to a low-income consumer dining out less often and frustrated by price hikes. Sales remain weak at many chains this year despite a year-long value war.
Jack in the Box, like many companies, believe that it is not hitting the right notes with value. “We probably need to be looking at a little more price point value, a little more consistent value,” Tucker said. “And making sure it’s visible by being on the menu board, which we don’t always do when we do an LTO.”
The Hispanic market is more difficult. Restaurant traffic in Hispanic-heavy communities has been weak this year amid the Trump Administration’s visible crackdown on immigration.
Jack in the Box’s two biggest markets are California and Texas, two states with big Hispanic communities. Tucker said that the chain over-indexes in the Hispanic market by 1.7 times the industry as a whole and twice as much as some competitors. “We significantly over-index on the Hispanic customer,” Tucker said.
Also hit hard: Jack in the Box stock, which fell more than 5% on Thursday. Its stock is down 57% this year.
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