Investing.com -- Shares of Jack In The Box (NASDAQ:JACK) fell sharply in after-hours trading Wednesday after the company announced plans to close underperforming stores, discontinue its dividend, and sell its Del Taco unit. The company called it the 'JACK on Track' plan. Further, the restaurant chain also updated its annual guidance.
Jack in the Box stock last traded down 6% in after-hours trading on Wednesday following the news.
Jack in the Box has announced a strategic block closure program targeting the shutdown of 150 to 200 underperforming locations. The initiative, which primarily affects restaurants that have been part of the Jack in the Box system for over 30 years, is set to occur in two phases. The first phase includes closing 80 to 120 restaurants by December 31, 2025. The second phase will see the remaining closures align with the termination dates of respective franchise agreements.
Jack in the Box also stated that it would halt its dividend payments effective immediately. The company had been paying a dividend of $1.76 per share on an annual basis, which was yielding nearly 7%. The funds typically distributed as dividends will now be primarily used to reduce the company's debt, with the remaining portion allocated to share repurchases. Looking ahead, Jack in the Box will notably cut back on its expenditure for the development of new company-owned restaurants starting in 2026. However, the company is committed to continuing with the planned enhancements of its existing restaurant network through reimagining projects.
For Del Taco, the Company hired BofA Securities to assist in exploring strategic alternatives, including a possible sale.
The company anticipates capital expenditures to be between $100 million and $105 million, with share repurchases estimated at approximately $5 million to $15 million. The adjusted operating earnings per share (EPS) tax rate is projected at around 26.0%, with adjusted EBITDA forecasted to be $282 million to $292 million. This forecast excludes the potential impact of the company's "JACK on Track" initiatives that may be implemented later in fiscal year 2025. Operating EPS is expected to range from $5.05 to $5.40, also excluding any "JACK on Track" actions, which compares to the consensus of $5.27.
For the Jack in the Box segment specifically, the company is facing a same-store sales decline in the low-to-mid-single digits compared to fiscal year 2024. The brand plans to open 35 to 40 new restaurants and anticipates a company-owned restaurant level margin of 19% to 21%. These projections include the full-year impact of AB1228 wage increases, higher utility costs, and low to mid-single digit commodity inflation. Management also indicated that it would introduce new long-term guidance measures as progress is made on the "JACK on Track" initiatives.
In addition to the full-year outlook, Jack in the Box pre-announced its second-quarter results for the fiscal year ending April 13, 2025. The company reported a same-store sales decrease of 4.4% for Jack in the Box and a 3.6% decline for Del Taco. Adjusted EBITDA for the quarter is expected to be between $66 million and $68 million. During the quarter, Jack in the Box opened 5 new restaurants and closed 12, while Del Taco opened 6 new locations and closed 4.
