Portillo’s(PTLO) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q4 2025, revenues were $185.7 million, an increase of $1.1 million or 0.6% year-over-year [10] - Same-restaurant sales declined by 3.3%, resulting in a revenue decrease of approximately $5.4 million [10] - Restaurant-Level Adjusted EBITDA decreased by $4.7 million to $40.6 million, with margins dropping approximately 270 basis points to 21.8% [13] - General and administrative expenses decreased by $0.9 million to $19.4 million, or 10.5% of revenue [14] - Adjusted EBITDA was $24.7 million, a decrease of 2.1% compared to the prior year [15] Business Line Data and Key Metrics Changes - Non-comparable restaurants contributed $7.8 million to the total year-over-year revenue increase [10] - The Kennesaw restaurant opened in November and generated over $2 million in sales in its first eight weeks [4][10] - The company plans to open 8 new restaurants in 2026, with capital expenditures expected to be between $55 million and $60 million [17] Market Data and Key Metrics Changes - The Texas market expansion has been a headwind, impacting consolidated restaurant-level margins by 180 basis points in Q4 [13] - The company is focusing on improving labor management and profitability in lower-volume restaurants in Texas [8] Company Strategy and Development Direction - The company has reset its development strategy, slowing new store openings to focus on healthy unit economics [4] - The new approach involves separating new unit openings with more time and distance to build awareness and demand [7] - The Perks program has over 2 million members and is expected to drive traffic improvements in 2026 [7] Management's Comments on Operating Environment and Future Outlook - Management acknowledges challenges in the Texas market but is optimistic about the potential for future growth [4] - The company anticipates mid-single-digit commodity inflation, particularly in the beef category, impacting costs [12] - Management is focused on transaction growth rather than pricing increases to drive revenue [11] Other Important Information - The company ended the quarter with $20 million in cash and $334 million in net debt [17] - The effective tax rate for the year was 12.4%, down from 16.2% in 2024 [17] Q&A Session Summary Question: Kennesaw restaurant sales and future expectations - Management reported Kennesaw generated $3.8 million in sales in its first 100 days, with expectations of settling around $200,000 per week [22] Question: Clarification on EBITDA results in Texas - Management confirmed both margin expansion and profitability improvements were observed among Texas restaurants [25] Question: New growth strategy impact on hiring - The new strategy may lead to less efficient openings and challenges in distribution, but the trade-off is deemed acceptable [30] Question: Regional performance in comps - No significant gaps were observed between Chicagoland and outer markets, though Arizona faced some pressure due to cannibalization [33] Question: Consumer value proposition in Chicagoland - Improvement in value perception scores was noted, driven by promotional offers and operational focus [38] Question: Marketing spending expectations - A slight uptick in marketing spend is expected, focusing on an "always-on" approach rather than pulsing [86]