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 [11] - Same-restaurant sales declined by 3.3%, resulting in a revenue decrease of approximately $5.4 million [11] - Restaurant-Level Adjusted EBITDA decreased by $4.7 million to $40.6 million, with margins dropping approximately 270 basis points to 21.8% [14] - General and administrative expenses decreased by $0.9 million to $19.4 million, or 10.5% of revenue [15] - Cash from operations decreased by 26.7% year-over-year to $71.9 million [18] Business Line Data and Key Metrics Changes - Non-comp restaurants contributed $7.8 million to the total year-over-year revenue increase during the quarter [11] - The average check remained flat, with a 2.3% increase in net effective menu prices offset by a 2.3% decrease in product mix [11] Market Data and Key Metrics Changes - The Texas market expansion continued to be a headwind for the business, impacting consolidated restaurant-level margins by 180 basis points in Q4 [14] - The Kennesaw restaurant in Atlanta opened in November and generated over $2 million in sales in its first eight weeks [5][6] Company Strategy and Development Direction - The company has reset its development strategy, slowing new store openings and focusing on healthy unit economics [5] - Future growth strategy includes entering new markets with a focus on building awareness and demand before opening subsequent restaurants [8] - The Perks program has over 2 million members and is expected to drive traffic improvements in 2026 [8] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges in the Texas market but expressed confidence in the brand's future [10] - The company anticipates mid-single-digit commodity inflation, particularly in the beef category, impacting costs [12] - For 2026, the company expects to open 8 new restaurants and total capital expenditures in the range of $55 million-$60 million [18] Other Important Information - The company experienced a 4% increase in commodity prices, impacting food, beverage, and packaging costs as a percentage of revenues [12] - Interest expense decreased to $5.7 million due to a lower effective interest rate [17] Q&A Session Summary Question: Kennesaw restaurant sales and future expectations - Management confirmed Kennesaw generated $3.8 million in sales over its first 100 days and does not expect it to reach $14 million [23] Question: EBITDA growth and margin expansion in Texas - Management indicated both margin expansion and profitability improvements were observed in Texas restaurants [26] Question: New growth strategy impact on hiring and operations - The new strategy may lead to less efficient new openings but is expected to improve long-term performance [31] Question: Regional performance and comp analysis - Arizona faced pressure due to cannibalization from a new restaurant, but overall performance was consistent across markets [33] Question: Consumer value proposition in Chicagoland - Improvement in value perception scores was noted, driven by promotional offers and operational focus [38] Question: Marketing strategy and spending - A slight uptick in marketing spend is expected, focusing on an "always-on" approach rather than pulsing [87] Question: Mix and transaction growth - The company is addressing mix headwinds through initiatives like kiosks to improve ticket size [90]