Portillo’s reports mixed Q1 results amid expansion By Investing.com

Portillo’s, the fast-casual restaurant chain known for its Chicago-style hot dogs and Italian beef sandwiches, experienced both growth and challenges in the first quarter of 2024.

While the company opened new locations and saw an overall increase in sales, severe weather and a drop in same-restaurant sales posed obstacles. However, Portillo’s remains optimistic about its expansion strategy and the performance of its new restaurants in the Sunbelt region.

Key Takeaways

• Portillo’s opened new restaurants in Dallas and Phoenix, contributing to a 6.3% increase in total sales.
• Same-restaurant sales fell by 1.2% due to severe weather impacts and a decrease in transactions.
• The company completed a secondary offering of 8 million shares, reducing Berkshire Partners’ ownership to 19.3%.
• Restaurant-level margins reached 21.9%, with a goal to maintain 23-24%.
• Portillo’s is focused on improving its drive-thru service and expanding its catering business.
• The company is hedged on 60% of its beef flats for the year to mitigate inflation pressures.

Company Outlook

• Portillo’s aims for low single-digit same-restaurant sales growth for 2024.
• At least nine new restaurant openings are planned for the year.
• The strategic pillars for 2024 include improving operations, enhancing the customer experience, achieving industry-leading returns, and supporting its teams.

Bearish Highlights

• Transactions decreased, contributing to the decline in same-restaurant sales.
• Labor costs rose due to wage rate increases and lower transactions.
• There is resistance from consumers to price increases in the drive-thru channel.

Bullish Highlights

• New restaurant openings have been successful, particularly in the Sunbelt region.
• The company has taken pricing actions to offset inflationary cost pressures.
• Portillo’s is developing alternative revenue streams, such as delivery and catering.

Misses

• The initial exceptional performance of the first restaurant in Texas is expected to decline following the “honeymoon curve.”
• Speed and throughput in the drive-thru service have been slower compared to 2019.

Q&A Highlights

• CEO Michael Osanloo discussed the extended development pipeline for more predictability in openings.
• CFO Michelle Hook addressed inflation in beef products and the company’s hedging strategy.
• The company is seeking ways to mitigate costs on other beef products and expects beef to remain a pressure point throughout the…