Mad Money host Jim Cramer believes Jersey Mike’s Subs Inc. (NYSE:JMKE) could be entering a longer-term rally, as he said on September 9:
What’s happening with Jersey Mike’s Subs? At the end of July, this Blackstone-backed sandwich chain came public with not enough fanfare as far as I’m concerned. Finished down 6%. At the time, I told you buy, buy, buy. But the stock really didn’t catch on until today. This morning, Jersey Mike’s reported an in-line quarter with better-than-expected guidance for same-store sales. And that’s why the stock jumped over 7% today. Now, I’m wondering if this might be the start of a longer-term rally… I want people to be in this stock.
Jersey Mike’s Sees Transaction Growth
Jersey Mike’s Subs Inc. reported second-quarter revenue of $208 million, up 10% year over year, while systemwide sales increased 10% to $1.210 billion. Same-store sales rose 2.3%, driven mainly by transactions, while the company opened 83 stores to reach 3,378 locations and 8.1% net unit growth. Management expects full-year 2026 same-store sales growth of 2.5% to 3%, net unit growth of at least 8% and adjusted EBITDA growth of at least 20%. Third-quarter same-store sales are expected to increase 3% to 4%.
Furthermore, CEO Charlie Morrison said transaction growth continued into the third quarter. Management expects about one percentage point or less of pricing in the back half, leaving transactions to drive most of the comparable-sales growth.
Debt and Earnings Concerns Remain
Jersey Mike’s Subs Inc. reported $2.118 billion of debt, net of discount, as of June 28. After the IPO, the company used approximately $301 million of proceeds to repay debt, leaving approximately $1.5 billion of net debt and leverage of about 4.4 times, according to management. Second-quarter net income fell to $37 million from $59 million a year earlier despite the 10% increase in revenue. Adjusted EBITDA increased to $114 million from $107 million.
CEO Morrison also said it was still early to determine whether customers attracted by recent promotions would return. The company is trying to reach younger consumers through digital marketing, social media and influencers, an area where management said the brand had not previously been top of mind.
Jersey Mike’s Subs Inc. remains backed by Blackstone following its July IPO, which raised approximately $1 billion. Blackstone-affiliated entities sold 2.57 million shares on August 25 in connection with the IPO over-allotment.
Jersey Mike’s Subs Inc. has improving transaction growth, continued unit expansion and a higher same-store sales outlook. The company also has significant room to expand its store base, while management expects to reduce leverage through EBITDA growth and cash generation. For investors considering Cramer’s bullish view, the main counterweight is the company’s still-substantial debt load and the need to sustain the recent improvement in transactions as expansion continues.
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