Portillo's (NASDAQ:PTLO) Reports Sales Below Analyst Estimates In Q1 Earnings

Anthony Lee /
2024/05/07 8:13 am EDT

Casual restaurant chain Portillo’s (NASDAQ:PTLO) fell short of analysts' expectations in Q1 CY2024, with revenue up 6.3% year on year to $165.8 million. It made a GAAP profit of $0.08 per share, improving from its loss of $0.01 per share in the same quarter last year.

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Portillo's (PTLO) Q1 CY2024 Highlights:

  • Revenue: $165.8 million vs analyst estimates of $174.9 million (5.2% miss)
  • Adjusted EBITDA: $21.8 million vs analyst estimates of $22.3 million (2.2% miss)
  • EPS: $0.08 vs analyst estimates of $0.06 (26% beat)
  • Gross Margin (GAAP): 21.9%, down from 22.3% in the same quarter last year
  • Free Cash Flow was -$7.86 million compared to -$13.05 million in the previous quarter
  • Same-Store Sales were down 1.2% year on year
  • Store Locations: 85 at quarter end, increasing by 10 over the last 12 months
  • Market Capitalization: $746.4 million

Michael Osanloo, President and Chief Executive Officer of Portillo’s, said “It’s an exciting time at Portillo’s. We’re proud of how we exited the quarter and will continue to build top-line momentum through disciplined sales-driving initiatives and new unit development. Today we revealed Portillo’s four strategic pillars, which will guide our 2024 goals and serve as the foundation for quality growth. Running world class operations, innovating and amplifying the Portillo’s Experience, building restaurants with industry-leading returns, and taking great care of our teams are the primary drivers of value creation at Portillo’s.”

Begun as a Chicago hot dog stand in 1963, Portillo’s (NASDAQ:PTLO) is a casual restaurant chain that serves Chicago-style hot dogs and beef sandwiches as well as fries and shakes.

Traditional Fast Food

Traditional fast-food restaurants are renowned for their speed and convenience, boasting menus filled with familiar and budget-friendly items. Their reputations for on-the-go consumption make them favored destinations for individuals and families needing a quick meal. This class of restaurants, however, is fighting the perception that their meals are unhealthy and made with inferior ingredients, a battle that's especially relevant today given the consumers increasing focus on health and wellness.

Sales Growth

Portillo's is a small restaurant chain, which sometimes brings disadvantages compared to larger competitors benefitting from better brand awareness and economies of scale.

As you can see below, the company's annualized revenue growth rate of 9.4% over the last four years (we compare to 2019 to normalize for COVID-19 impacts) was decent as it opened new restaurants and grew sales at existing, established dining locations.

Portillo's Total Revenue

This quarter, Portillo's revenue grew 6.3% year on year to $165.8 million, missing Wall Street's expectations. Looking ahead, Wall Street expects sales to grow 13.2% over the next 12 months, an acceleration from this quarter.

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Same-Store Sales

A company's same-store sales growth shows the year-on-year change in sales for its restaurants that have been open for at least a year, give or take. This is a key performance indicator because it measures organic growth and demand.

Portillo's demand within its existing restaurants has generally risen over the last two years but lagged behind the broader sector. On average, the company's same-store sales have grown by 4.5% year on year. With positive same-store sales growth amid an increasing number of restaurants, Portillo's is reaching more diners and growing sales.

Portillo's Year On Year Same Store Sales Growth

In the latest quarter, Portillo's same-store sales fell 1.2% year on year. This decline was a reversal from the 9.1% year-on-year increase it posted 12 months ago. We'll be keeping a close eye on the company to see if this turns into a longer-term trend.

Key Takeaways from Portillo's Q1 Results

Portillo's revenue and adjusted EBITDA unfortunately missed analysts' expectations. Overall, the results could have been better. The company is down 4.7% on the results and currently trades at $11.55 per share.

Portillo's may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.