Jack in the Box Announces Del Taco Divestiture, Shares Decline

Jack in the Box Divests Del Taco, Stock Experiences Decline

Jack in the Box (NASDAQ: JACK) shares experienced a significant decline, falling 9.1% in afternoon trading, following the company's announcement of its decision to sell Del Taco, its Mexican fast-food subsidiary. The transaction involves the sale of Del Taco, which encompasses nearly 600 stores, to Yadav Enterprises for $115 million in cash. This sale price represents a substantial markdown from the approximately $575 million Jack in the Box paid to acquire Del Taco in 2021-2022, a period when the restaurant industry was navigating a post-pandemic rebound.

Strategic Rationale and Financial Context

The divestiture comes after a period of underperformance for Del Taco, which recorded declining same-store sales for six consecutive quarters. Jack in the Box itself has also faced challenges, reporting its weakest sales performance in years during a recent fiscal quarter. The company stated that the sale is a strategic move to "return to simplicity" and re-focus on its core Jack in the Box brand. Proceeds from the sale are earmarked for debt reduction, addressing concerns regarding the company's financial health, particularly its leverage and potential liquidity constraints.

Lance Tucker, Chief Executive Officer of Jack in the Box Inc., articulated the company's strategic direction:

"This divestiture is an important step in returning to simplicity, and we look forward to focusing on our core Jack in the Box brand."

Impact on Financials and Debt Structure

The sale is expected to remove Del Taco's revenue from Jack in the Box's consolidated financial statements but is anticipated to improve overall profitability by shedding an underperforming asset. For Q3 2025, Jack in the Box reported total revenues of $332.99 million, falling short of analyst expectations of $340.68 million. Consolidated adjusted EBITDA for the quarter decreased to $61.6 million, down from $78.9 million in the prior year. Diluted earnings per share (EPS) stood at $1.15, with operating EPS at $1.02, missing analyst estimates. Same-store sales declined by 7.1% for Jack in the Box and 2.6% for Del Taco.

The net cash proceeds from the $115 million sale are intended to retire debt within the company's securitization structure, specifically targeting a portion of its Series 2019-1 4.476% Fixed Rate Senior Secured Notes, Class A-2-II. This action aligns with the "Jack on Track" plan, initiated in April 2025, which aims to reduce total debt by at least $300 million over 12-18 months. The plan targets a debt-to-EBITDA ratio of 3x by 2026, a significant reduction from 4.5x in early 2025. Other measures to accelerate debt reduction include discontinuing the dividend, which will redirect approximately $100 million annually, and selling select real estate holdings.

Market Performance and Broader Implications

Jack in the Box stock has demonstrated considerable volatility, with 44 moves greater than 5% over the past year. Today's decline underscores the market's perception of the news's significance. The stock is currently trading at $17.73 per share, representing a 65.6% decrease from its 52-week high of $51.52 reached in November 2024. Year-to-date, the stock has declined by 56.7%. As of October 16, 2025, the company's market capitalization was $332.53 million, with a Price-to-Earnings (P/E) ratio of -5.12, reflecting recent losses. This divestiture and strategic shift by Jack in the Box align with a broader industry trend where fast-food companies are streamlining operations and shedding non-core assets to navigate a challenging macroeconomic environment characterized by cautious consumer spending, inflation, and rising labor costs. The company also plans to close 150-200 underperforming restaurants, with 80-120 expected by the end of 2025.

Outlook and Key Considerations

The company's immediate focus remains on debt reduction, strengthening its balance sheet, and cultivating a more asset-light business model centered on the core Jack in the Box brand. Investors will be monitoring the effectiveness of the "Jack on Track" plan and its impact on future financial performance. The next earnings release for JACK is anticipated on November 19, 2025, with an estimated EPS of $0.48, which will provide further insights into the company's progress following this significant divestiture.