Stock Story -
Fast food chain El Pollo Loco (NASDAQ:LOCO) reported Q4 FY2023 results beating Wall Street analysts' expectations, with revenue down 3.2% year on year to $112.2 million. It made a non-GAAP profit of $0.16 per share, down from its profit of $0.16 per share in the same quarter last year.
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El Pollo Loco (LOCO) Q4 FY2023 Highlights:
- Revenue: $112.2 million vs analyst estimates of $109.1 million (2.9% beat)
- Adjusted EBITDA: $13.6 million vs analyst estimates of $13.4 million (1.5% beat)
- EPS (non-GAAP): $0.16 vs analyst expectations of $0.16 (1.5% miss)
- Gross Margin (GAAP): 20.2%, up from 19.1% in the same quarter last year
- Same-Store Sales were up 0.9% year on year (miss vs. expectations of up 1.1% year on year)
- Store Locations: 495 at quarter end, increasing by 5 over the last 12 months
- Market Capitalization: $296.6 million
With a name that translates into ‘The Crazy Chicken’, El Pollo Loco (NASDAQ:LOCO) is a fast food chain known for its citrus-marinated, fire-grilled chicken recipe that hails from the coastal town of Sinaloa, Mexico.
Traditional Fast FoodTraditional 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 GrowthEl Pollo Loco 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 1.5% over the last four years (we compare to 2019 to normalize for COVID-19 impacts) was weak , but to its credit, it opened new restaurants and grew sales at existing, established dining locations.
This quarter, El Pollo Loco's revenue fell 3.2% year on year to $112.2 million but beat Wall Street's estimates by 2.9%. Looking ahead, Wall Street expects revenue to remain flat over the next 12 months.
Same-Store SalesA 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.
El Pollo Loco'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 2.9% year on year. With positive same-store sales growth amid an increasing number of restaurants, El Pollo Loco is reaching more diners and growing sales.
In the latest quarter, El Pollo Loco's year on year same-store sales were flat. By the company's standards, this growth was a meaningful deceleration from the 4.7% year-on-year increase it posted 12 months ago. We'll be watching El Pollo Loco closely to see if it can reaccelerate growth.
Key Takeaways from El Pollo Loco's Q4 Results We like that revenue outperformed Wall Street's estimates despite a slight same store sales miss. Adjusted EBITDA was in line with expectations Zooming out, we think this was a fine quarter. The stock is flat after reporting and currently trades at $9.17 per share.