Shares of Jack in the Box Inc. JACK have declined 18.3% in the past month compared with the Zacks Retail – Restaurants industry’s 4.1% fall. The stock has underperformed the Zacks Retail-Wholesale sector’s and the S&P 500’s decrease of 8.4% and 6.9%, respectively.
JACK experienced notable volatility in March. At the beginning of the month, the stock was trading above $38, reaching as high as $39.65 on Feb. 27. However, a steep decline began in mid-March, with JACK tumbling to $33.73 on March 11 and further dropping to $31.13 by March 13. Since then, the stock has struggled to regain momentum, hovering in the low $31-$32 range. The downward trajectory suggests weakened investor confidence, possibly fueled by concerns over market conditions and the company’s long-term growth potential.
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Market concerns over growth have led analysts to question JACK’s ability to expand successfully in a competitive fast-food market. Industry headwinds, such as rising beef prices, and inflationary pressures, are impacting profitability. From a technical standpoint, JACK stock is currently trading below its 50 and 200-day moving averages.
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However, some analysts believe the stock is undervalued and that it has a potential for a rebound. Given the current price point, should investors pour more capital into JACK shares now? Let’s take a closer look.
Jack in the Box is navigating a challenging environment marked by softening consumer demand, traffic declines, and macroeconomic pressures. In the first quarter of fiscal 2025, Del Taco’s same-store sales fell 4.5% year over year against the 2.2% growth reported in the year-ago quarter. Reduced transactions and an unfavorable mix shift caused the downside. Same-store sales at franchised stores declined 5.1% year over year against the growth of 2.4% reported in the prior-year quarter. The company expects the brand to deliver negative comps in the fiscal second quarter as well. The company is grappling with weak industry-wide traffic trends, reflecting cautious consumer spending.
Franchisee performance remains mixed, with a net decline in store count during the first quarter of fiscal 2025. While Jack in the Box plans to open 35-45 locations in fiscal 2025, its closure rate highlights challenges in sustaining unit economics, particularly in underperforming markets. Meanwhile, Del Taco continues to struggle, reporting negative same-store sales and weaker traffic trends.
Cost pressures are another key concern. Although restaurant-level margins held steady at 23.2%, labor and commodity costs remained a headwind. A recently renegotiated beverage contract provided a one-time benefit. However, sustaining margin improvements is likely to be an issue.
Amid these headwinds, Jack in the Box is implementing a strategic roadmap to regain momentum and drive long-term shareholder value. The company is strengthening its marketing calendar, leveraging product innovation and targeted promotions to reinvigorate sales. It remains committed to its barbell pricing strategy, balancing premium offerings with strong value propositions to attract price-sensitive consumers.
Backed by menu diversity, price points and positive customer feedback, the company remains flexible and resilient against a shift in customer behavior. Going forward, JACK intends to focus on innovation plus beverage and snack attachment to support the hook-and-build strategy. This and the emphasis on value messaging is likely to have driven frequency in the upcoming period. Digital transformation remains a priority, with ongoing investments in loyalty programs and mobile ordering. Enhancing digital capabilities is expected to drive repeat traffic and improve average check sizes, positioning Jack in the Box for a more resilient recovery.
The company continues to collaborate with its franchisees and leverage guest insights to ensure value remains a competitive advantage for both brands. Jack in the Box achieved significant growth in fiscal 2024 with a 50% increase in gross restaurant openings compared with the previous year. New restaurants in whitespace markets maintained strong momentum, outperforming the system in both core and new territories. For fiscal 2025, new openings under the Jack in the Box and Del Taco brands are expected to be between 35 and 45 units and 15 and 20 units, respectively. The Jack in the Box openings include new units in Chicago in the summer and Florida later in 2025.
Meanwhile, the company continues to focus on repairing its franchisee relationship, mapping markets and rebuilding its store pipeline to drive growth. During the first quarter of fiscal 2025, it had 93% of its restaurants franchised. We believe franchising a large chunk of its system will lower its general and administrative expenses and thereby boost earnings. Moreover, in the long term, it would generate a higher return on equity by lowering capital requirements. This would also boost free cash flow, thereby enhancing shareholder return.
The Zacks Consensus Estimate for JACK’s 2025 earnings per share has increased from $5.33 to $5.36 in the past 30 days. The upward revision in earnings estimates indicates analysts’ increasing confidence in the stock.
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Jack in the Box — sharing space with Kura Sushi USA, Inc. KRUS, Brinker International, Inc. EAT and Shake Shack Inc. SHAK — is trading at a discount. JACK is currently trading at a forward 12-month price-to-sales (P/S) multiple of 0.38X, well below the industry average of 4.09X. This discount offers a compelling opportunity for investors looking for growth at a reasonable price.
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Jack in the Box’s strategic initiatives, including targeted marketing campaigns, digital enhancements and a refined franchise expansion plan, position the company for a potential recovery. Its emphasis on value offerings, menu innovation and operational efficiencies reflects a proactive approach to navigating industry challenges. Additionally, investments in loyalty programs and digital ordering capabilities are expected to drive customer engagement and improve sales trends over time.
However, headwinds persist. Weaker traffic trends, macroeconomic uncertainties and rising labor and commodity costs remain key concerns. The company’s declining same-store sales and cautious guidance for the second quarter of fiscal 2025 suggest ongoing difficulties in regaining momentum.
Given these factors, this Zacks Rank #3 (Hold) stock may not present an immediate buying opportunity. Investors already holding shares should consider maintaining their position while monitoring the company’s execution of its turnaround strategy. For new investors, waiting for clearer signs of sustainable growth and improved financial performance could be a prudent approach.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).
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