Portillo’s same-store sales increased 8.2 percent in Q1 year-over-year, driven mostly by a 7.5 percent lift in average check, offset by a 2.2 percent slide in traffic. The growth in average check was fueled by a 7.1 percent rise in menu prices. Portillo’s, which has yet to see resistance or elasticity to its pricing hikes, plans to take another increase in the second quarter.
In addition to rising labor costs, costs of goods sold rose to 34.4 percent, compared to 29.9 percent last year. There was a 15.7 percent average increase in commodity prices, with higher impacts in pork, chicken, and beef. Portillo’s previously projected 13-15 percent commodity inflation for 2022, and the company believes it will end up in the higher end of that range.
Portillo’s is limiting the magnitude of commodity inflation through fixed-price contracts. The chain is covered for more than half of its spend through the rest of 2022.
“When we look at the Q3, Q4 locks on those, you obviously weigh what the cost is of locking in at that, given certain prices,” said CFO Michelle Hook. “And so like I said, when opportunities arise, we're going to lock in. … I'm not going to lock ourselves into something now knowing that there could be opportunities in the future.”
“Because, as you know, when you look at forward projections, we do expect some easing,” she added. “And like we said, we know these pressures are more transient. So we're not locking into really longer-term numbers because we do think, as you look into '23 and '24 that, again, we would expect and hope to be some easing there.”
The chain’s same-store sales lifted 9.2 percent in January and 13.6 percent in February, but increased just 2.5 percent in March as the company lapped a 24.6 percent performance last year. Portillo’s chose not to share data from April, as it rolled over 34 percent comps from 2021. Although the chain is entering a tough stretch, it remains confident in same-store sales growth in the low single digits for 2022.
“At the end of the day, we're on track,” Osanloo said. “We're executing the playbook we shared with you during our IPO. We're confident in our long-term growth algorithm. The restaurant industry is cyclical. It's going to have its ups and downs, but we know how to manage our business for that.”
As of early May, Portillo’s had 71 locations in nine states. The chain's long-term goal is 600 restaurants.
In addition to its openings in Joliet, Illinois, and St. Petersburg, Florida, the fast casual is planning five more debuts in Gilbert and Tucson, Arizona; The Colony, Texas; Kissimmee, Florida; and Schererville, Indiana. If each store opens on schedule, Portillo’s will meet its 10 percent unit growth commitment. Nearly all of them will open in Q4, which Osanloo blamed on the slower-than-usual permitting process.
Total revenue increased 14.6 percent to $134.5 million in Q1. Restaurant-level adjusted EBITDA decreased $1.8 million to $28 million, and margins were 20.8 percent, down from 25.4 percent last year. The margin decline was due to commodity costs, and to a lesser extent, labor inflation.