Jack in the Box is Ready to Coil

Fast-food chain Jack in the Box NYSE: JACK stock has been selling off after peaking at $124.53 in April 2021. The restaurant chain is continuing to expand as it committed to 111 future restaurants this year. The Company is also set to grow with the acquisition of fast casual Mexican restaurant chain Del Taco, which was accretive and improved synergies. The Company has almost completely replaced the executive leadership with a new CEO followed by COO, CFO and CMOs. It also launched its Jack Pack Rewards program to bolster digital engagement of its app. Its digital database has grown by 30% in 2021 with digital sales accounting for 8% of total sales. While inflation impacts are real, it doesn’t suffer from supply chain constraints that retailers are facing. With a low P/E of 11.50, shares are trading at cheaper levels than its competitors. Prudent investors seeking exposure in the fast food segment can watch for opportunistic pullback levels in Jack in the Box.

Q4 Fiscal 2021 Earnings Release

On Nov. 23, 2021, Jack in the Box released its fourth-quarter fiscal 2021 results for the quarter ending September 2021. The Company reported an earnings-per-share (EPS) profit of $1.80 excluding non-recurring items versus consensus analyst estimates for a profit of $1.74, beating estimates by $0.06. Revenues rose 9% year-over-year (YoY) to $278.5 million falling short of $288.76 million consensus analyst estimates. Same-store comparable sales grew 8.6% YoY. There was no change to full-year 2022 outlook, but same store sales expected to grow 2% to 3% with system wide sales up 3% to 5%. Jack in the Box CEO Darrin Harris commented, “"I am very proud of the execution and determination shown by our outstanding franchisees and corporate team members, continuing to deliver for our guests during a challenging operating environment. We closed the year with strong comps on a two-year basis of +12.3% in Q4, leading us to another record-setting year of store-level profitability — a key element in driving results against our growth strategy in the near future. We continue to focus heavily on making significant progress on our strategic pillars, growth objectives, and unlocking substantial value for JACK shareholders."

Conference Call Takeaways

CEO Harris set the tone, Beginning with building brand loyalty. Our updated brand positioning and Crave marketing strategy is significantly improving our brand awareness and perception, helping us achieve our highest creative metrics since 2019. From a product and promotional standpoint, both Triple Bacon Cheesy Jack and Bacon Barbecue Cheeseburger promotions performed well, driving what was a very good quarter for our burger category. And while burger performance was strong, you can never count out our tacos as spicy Tiny Tacos in quarter four was our highest volume LTO over the year and showed strong attachment and upsell into the loaded version. Finally, our all-day breakfast message, a good example of learnings from our guest feedback helped reinforce a brand strength and drove another solid performance from our breakfast day part which included strength from the Stacked Croissant LTO as well as our core breakfast menu items. Our menu diversity, price point and guests have allowed us to remain resilient and flexible to shifts in customer behavior, helping to diminish the impact of the recent volatility. Our ability to stay flexible and innovate systems while building a long-term product pipeline has me very confident that menu innovation remains one of our core strengths. Our progress within the e-commerce and loyalty space has enabled digital to become central to our guest experience and brand fabric. We had a tremendous year of digital growth achieving a 90.6% increase in digital sales in 2021 versus the prior year. We achieved a digital run-rate milestone during quarter four by exceeding 9% of sales via digital channels.” He concluded, “Our 31 completed site approvals are the most since back in 2017, especially considering we spent a good part of the year repairing our franchisee relationship, mapping markets, and rebuilding a store pipeline. And now we are ready to succeed. We also spent time getting our franchise development program up and running which didn't really happen until late in the year. So, I'm extremely pleased with the progress so far. Now we know this doesn't translate to immediate openings on paper but make no mistake, it is a clear leading indicator that our franchisees are as excited as ever about growing within this brand. And we will continue to keep you informed in these new development agreements with both existing and new franchisees throughout 2022.”

JACK Opportunistic Pullback Levels

Using the rifle charts on the weekly and daily time frames provides a precision view of the landscape for JACK stock. The weekly rifle chart peaked near the $124.54 Fibonacci (fib) level before collapsing to $77.13 lows of the year. The weekly rifle chart put in a potential spinning top bottom on the downtrend with a falling 5-period moving average (MA) at $90.60. Shares overshot the weekly lower Bollinger Bands (BBs) at $81.80. The weekly stochastic has a mini inverse pup falling towards the 20-band. The daily rifle chart is in a make or break with a flat 5-period MA at $83.46 followed by the 15-period MA closing in. The daily stochastic is attempting a mini pup through the 30-band. The daily lower BBs sit at $71.14. The daily market structure low (MSL) buy triggers on an $84.48 breakout. Prudent investors can watch for opportunistic pullback levels at the $82.03 fib, $80.27 fib, $76.40 fib, $73.81 fib, $71.59 fib, and the $69.45 fib. Upside trajectories range from the $97.77 fib level up towards the $117.25 fib level.

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