El Pollo Loco(US:LOCO)2024-03-08 03:16Financial Data and Key Metrics Changes - Total revenue for Q4 2023 decreased by 3.2% to $112.2 million compared to $115.9 million in Q4 2022 [16] - Company-operated restaurant revenue decreased by 5.7% to $94 million from $99.6 million in the same period last year [16] - GAAP net income for Q4 was $4.4 million or $0.14 per diluted share, down from $6.5 million or $0.18 per diluted share in the prior year [20] - Adjusted net income for Q4 was $5.2 million or $0.16 per diluted share, compared to $6 million or $0.16 per diluted share in the same quarter last year [20] Business Line Data and Key Metrics Changes - Franchise revenue increased by 17% to $11 million during Q4, driven by a 1.6% increase in franchise comparable restaurant sales and five new franchise openings [17] - The decrease in comparable restaurant sales included a 0.4% decrease in average check size, offset by a 0.2% increase in transactions [16] Market Data and Key Metrics Changes - For Q1 2024, system-wide comparable store sales increased by 3.8%, consisting of a 2.2% increase in company-operated restaurants and a 4.7% increase in franchise restaurants [17] Company Strategy and Development Direction - The company aims to focus on five operational pillars, including attracting and retaining talent, emphasizing their fire-grilled chicken, enhancing digital services, ensuring operational consistency, and improving economic fundamentals with franchisees [7][8][10][14] - The company plans to remodel 15 to 20 company-owned restaurants and 40 to 50 franchise restaurants in 2024 to enhance customer experience [14][21] Management's Comments on Operating Environment and Future Outlook - Management noted that they are working to offset wage increases in California through operational efficiencies and price adjustments, expecting to offset one-third to half of the wage increase impact [30][31] - The company is seeing pressure on consumer spending, with customers managing their check sizes and trading down, but they are also focusing on providing value [33][34] Other Important Information - The company has a new share repurchase program authorized for up to $20 million through March 31, 2025, with $7.4 million remaining under the authorization [22] - The company expects capital spending between $25 million and $28 million for 2024 [23] Q&A Session Summary Question: Development guidance and remodel expectations - Management indicated that they are seeing good sales momentum from remodels and are actively recruiting more franchisees to accelerate development [26][27] Question: Strategy to offset wage increases - Management discussed their operational initiatives to offset wage increases and shared insights on the efficiency of kiosks and salsa processing equipment [28][30] Question: Consumer environment and value strategy - Management noted that while consumers are under pressure, they are testing ways to offer more value across the menu to meet consumer demand [32][35] Question: P&L and commodity costs - Management explained that there was no specific item driving higher food and packaging costs, and they are pleased with the performance of their new locations in Colorado [36][37] Question: Cadence of limited-time offers (LTOs) - Management stated that they will reduce LTOs from six to five in 2024 due to positive consumer reception of certain items [38][39]