JACK Delivers a Bomb
Restaurant margin missed by (370bps) and operating margin missed by (830bps), although food/packaging costs were (220bps) lower than expected. Del Taco will prove to be a distraction to the core JACK business.
Revenue $322.3M vs year-ago $257.2M; Comps (0.8%) vs FactSet +0.8%; Operating EPS $1.16 vs FactSet $1.33 and Adjusted EBITDA $64.4M vs FactSet $66.9M. The company new FY Sep 2022 guidence of Operating EPS $5.80-6.10 vs FactSet $6.47 and Jack in the Box: Flat to +1.0% Del Taco +3.0% to +4.0% and other items:
- CapEx & Other Investments including Del Taco, are now $75-80M and was $70-75M for just Jack in the Box
- FY 2022 Company-wide SG&A now $120-130M previously $92-97M, Jack in the Box only
- Jack in the Box Guidance - Commodity Guidance is now up 12-14% vs. 6-7%
- Jack in the Box Company-owned Wage Rate Guidance now up 12-13% vs. 2021 previously 8-10%
- Jack in the Box Overall Restaurant Level Margin is now expected to be 17% was previously 20-21%, which includes high single-digit price increases
- Restaurant Level Margin when removing 'Evolving Markets' (including Oregon, Kansas City, Oklahoma City and Nashville) is expected to be ~20%
- Same-store sales up 2 to 3%
- Net unit growth up 1 to 3% (reaching 4% by 2025)
WEN - What will Trian do?
The company has postponed its virtual Investor Day, previously planned for June, and Reaffirms Dec 2022 Guidance. I don't see Trian making a bid for the company, but rather trying to sell the company. In late 2020, Inspire Brands, bought Dunkin’ Brands for about $11 billion, including approximately $3 billion of debt for about 22x EBITDA consensus 2021 estimates. WEN currently trades at 11x 2023 EV/EBITDA and MCD at 16x. If WEN traded at 14x 2022 EV/EBITDA it's a $25 stock or 33% upside.
Current guidence:
- EPS $0.82-0.86 vs FactSet $0.83
- Adjusted EBITDA $490-505M vs FactSet $490.7M
- Global systemwide sales growth 6-8%
- Cash flow from operations $305-325M vs FactSet $306.9M
- FCF $215-225M vs FactSet $214.2M
- Capex $90-100M vs FactSet $94.0M
Management Comment: "As evidenced by our sales momentum, which accelerated on a 2-year basis in Q1 2022, we continue to make significant progress across our three long-term growth pillars: building our breakfast daypart, accelerating our digital business, and expanding our footprint across the globe," President and Chief Executive Officer Todd Penegor said. "We achieved a second consecutive quarter of double-digit 2‐year global same‐restaurant sales, opened over 90 new restaurants, accelerated our global digital business to over 10% of total sales, and grew our morning meal dollar and traffic share in the QSR burger category." Our strong momentum, sound execution of our strategic initiatives, and improvement in Company-operated restaurant margin as we exited the first quarter give us the confidence to reaffirm this full year 2022 outlook."
RRGB - Better than expected, but!
Management offered up that "In terms of our fiscal Q2 2022 sales trends to date, during the fifth period, preliminary comparable restaurant revenue rose 7.3% compared to 2019." I would note that we are nearly 2/3 thru 2Q22 and management only offered up sales trends to date during the 5th period? What have sales trends done since then?
About the quarter:
- Revenue $395.6M vs FactSet $381.2M
- Adjusted EBITDA $28.0M vs FactSet $17.5M
- Comps +19.7% vs FactSet +17.0%
- Reiterated FY Guidance (Dec 2022): ◦
- Adjusted EBITDA $80-90M
- mid-to-high single-digit commodity and restaurant labor cost inflation
- Selling, general and administrative costs between $145-155M
- Capital expenditures of $40-50M
As noted the company maintained its EBITDA guidance on the back of the 1Q numbers but raised commodity inflation expectations from "high-single digits to low-double digits for the year." Other than beating numbers not many positives about the future of RRGB.
