Stock Story -
Casual restaurant chain Portillo’s (NASDAQ:PTLO) beat analysts' expectations in Q4 FY2023, with revenue up 24.5% year on year to $187.9 million. It made a GAAP profit of $0.13 per share, improving from its profit of $0.08 per share in the same quarter last year.
Is now the time to buy Portillo's? Find out by reading the original article on StockStory.
Portillo's (PTLO) Q4 FY2023 Highlights:
- Revenue: $187.9 million vs analyst estimates of $184.2 million (2% beat)
- EPS: $0.13 vs analyst estimates of $0.06 ($0.07 beat)
- Gross Margin (GAAP): 24.3%, up from 21.2% in the same quarter last year
- Same-Store Sales were up 4.4% year on year
- Store Locations: 84 at quarter end, increasing by 12 over the last 12 months
- Market Capitalization: $762.3 million
Begun as a Chicago hot dog stand in 1963, Portillo’s (NASDAQ:PTLO) is a casual restaurant chain that serves Chicago-style hot dogs and beef sandwiches as well as fries and shakes.
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 GrowthPortillo's 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 9.1% over the last four years (we compare to 2019 to normalize for COVID-19 impacts) was decent as it opened new restaurants and grew sales at existing, established dining locations.
This quarter, Portillo's reported remarkable year-on-year revenue growth of 24.5%, and its $187.9 million in revenue topped Wall Street's estimates by 2%. Looking ahead, Wall Street expects sales to grow 12% over the next 12 months, a deceleration from this quarter.
Same-Store SalesSame-store sales growth is a key performance indicator used to measure organic growth and demand for restaurants.
Portillo'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 5.7% year on year. With positive same-store sales growth amid an increasing number of restaurants, Portillo's is reaching more diners and growing sales.
In the latest quarter, Portillo's same-store sales rose 4.4% year on year. This growth was a deceleration from the 6% year-on-year increase it posted 12 months ago, showing the business is still performing well but lost a bit of steam.
Key Takeaways from Portillo's Q4 Results
We were impressed by how significantly Portillo's blew past analysts' EPS expectations this quarter. We were also excited its revenue, gross margin, and EBITDA outperformed Wall Street's estimates. The main driver behind the company's outperformance was better-than-expected same-store sales growth (4.4% vs estimates of 3.5%). It also opened 6 new restaurants during the quarter (12 for all of 2023) in Illinois, Texas, and Florida. Earlier in the year, the company opened some locations in Arizona.
For 2024, the company estimates commodity and wage inflation to be in the mid-single digits. It will seek to offset these headwinds by raising the price of certain menu items by 1.5%. Furthermore, it plans to open at least 9 new restaurants in 2024 and stated its long-term goal of 12-15% annual increases in restaurant locations. Its near-term focus will be on the Sunbelt region and areas near its hometown of Chicago.
Zooming out, we think this was an impressive quarter that should delight shareholders. The stock is up 9% after reporting and currently trades at $15 per share.
