Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Portillos Inc (PTLO, Financial) achieved a 7.5% increase in total sales for Q2 2024.
- Restaurant-level margins were maintained at a healthy 24.5%.
- The company plans to open at least 10 new restaurants in fiscal 2024, boosting unit growth to nearly 12%.
- Drive-through speed improved by 15 seconds year-to-date compared to the same period last year.
- Portillos Inc (PTLO) launched its first kiosk prototype to enhance the guest experience and plans further installations.
Negative Points
- Comparable restaurant sales decreased by 0.6% in Q2 2024.
- Food, beverage, and packaging costs increased to 33.9% of revenues due to a 6.9% rise in commodity prices.
- Labor costs remained flat at 25.5% of revenues, with hourly labor rates up 3.1% year-over-year.
- Restaurant-level adjusted EBITDA margins declined by 80 basis points year-over-year, driven by softer sales.
- Pre-opening expenses increased significantly, reflecting the number and timing of new restaurant openings.
Q & A Highlights
Q: The full-year comp guide assumes the second half is stronger than the first half. What are the primary drivers of that acceleration?
A: Michael Osanloo, President, CEO, & Director: Our transaction trend and comp trend have improved quarter over quarter. We've focused on throughput and marketing, particularly in the Chicago area, which we believe will continue to accelerate our performance into the second half of the year.
Q: Can you explain the rationale behind the recent price increase?
A: Michael Osanloo, President, CEO, & Director: We adjusted pricing to align with local labor rates in certain jurisdictions. This was a methodical change to avoid sticker shock and ensure fair pricing across different markets.
Q: How has the new marketing campaign in Chicago been tweaked compared to last year?
A: Michael Osanloo, President, CEO, & Director: The messaging remains consistent, focusing on showcasing our food to remind people of how much they love Portillo's. We have increased our spend, particularly around NFL games, to drive brand awareness.
Q: What operational changes have driven the improvement in drive-through speed?
A: Michael Osanloo, President, CEO, & Director: Managerial presence and real-time coaching have been key. We've improved our drive-through speed by 15 seconds by focusing on efficiency and training our team members.
Q: Are there opportunities for improved throughput inside the restaurant as well?
A: Michael Osanloo, President, CEO, & Director: Yes, we see opportunities for better throughput inside the restaurant. We're testing kiosks to help with this and are actively looking for a new COO to further enhance our operations.
Q: How do you plan to differentiate Portillo's in the competitive football season advertising space?
A: Michael Osanloo, President, CEO, & Director: In Chicagoland, Portillo's has a strong brand presence. Our advertising catches consumer attention due to our established reputation and the infrequency of our ads, making them impactful.
Q: What are the latest updates on guest satisfaction scores?
A: Michael Osanloo, President, CEO, & Director: Our scores remain strong. We're focusing on behaviors that drive these scores, such as friendliness and speed, rather than managing the scores themselves.
Q: How are new units performing, and what are the plans for the Houston market?
A: Michael Osanloo, President, CEO, & Director: New units are performing well and meeting expectations. We are excited about entering the Houston market and continuing to build scale in Dallas and other markets.
Q: What changes have been made to the metrics for store manager bonuses?
A: Michael Osanloo, President, CEO, & Director: Store managers are bonused on sales, creating an ownership mindset. We've simplified the metrics to focus on sales and incremental profit, stripping away unnecessary metrics.
Q: What are the expectations for wage inflation and labor hours in the second half of the year?
A: Michelle Hook, CFO & Treasurer: We expect wage inflation to tick up in Q3 and Q4 due to annual rate increases. We continue to manage labor efficiently, focusing on deploying labor according to ideal labor grids and finding efficiencies in our kitchens.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
