Jack in the Box’s Same-Store Sales Push Rests on Tiny Tacos

(Bloomberg) -- After a disappointing quarter, a comeback in Jack in the Box’s same-store sales rests on menu innovation, namely, bite-size tacos.

The burger-chain operator reported softer-than-expected same-store sales for the first quarter late Wednesday. Shares pivoted as analysts took note of the promise in the new product rollout, erasing Thursday’s decline to rise as much as 2% on Friday. One analyst downgraded the stock to a hold-equivalent rating anyway.

Management’s “upbeat tone” on 2020 to 2021 sales initiatives, which include lower-priced food items, bodes well for a potential second-quarter same-store sales beat, Cowen analyst Andrew Charles said.

“We maintain Street-high 2Q comps of 5.5% despite limited commentary on the performance of Tiny Tacos,” Charles wrote in report published Thursday. The analyst maintained a buy-equivalent rating and a price target of $102.

Restoring its everyday value meal menu continues to be a work-in-progress, with Tiny Tacos just one among other offerings, Gordon Haskett analyst Jeff Farmer said.

“More everyday value items are in the pipeline – but management is keeping its plans close to the vest for the time being,” he wrote in another report Thursday.

While the progress that management has made thus far and the trajectory of same-store sales are promising, there’s “less upside from here,” said Baird analyst David Tarantino, who downgraded Jack in the Box to a neutral rating on Friday, maintaining a $90 target price. Lingering risks include pending CEO turnover and ongoing financial pressures among some franchisees.

To contact the reporter on this story: Crystal Kim in New York at ckim426@bloomberg.net

To contact the editors responsible for this story: Brad Olesen at bolesen3@bloomberg.net, Scott Schnipper, Jeremy R. Cooke

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