Portillo's reverses traffic slide, but the pace of growth remains a question mark

Traffic took an upward turn at Portillo’s in the first quarter, if ever so slightly.

Transactions were up 0.8% for the Chicago-based chain, though the increase was offset by a 0.9% decrease in the average check, resulting in a same-store sales decline of 0.1%.

That lower average check was attributed to a 1% decrease in product mix as diners traded down to less expensive menu items. And the mix decline was partially offset by a 0.1% increase in menu prices.

Still, it was an improvement from the prior fourth quarter, when Portillo’s same-store sales dropped 3.3%, largely on transaction declines.

Earnings and growth

In his first earnings call as CEO, Brett Patterson said he was encouraged by the improvement, despite Portillo’s swing to a loss for the March 29-ended quarter. The company recorded a net loss of $500,000, compared to net income of $4 million a year ago, a nearly 113% decline.

As he took the helm, Patterson said the company has embarked on several landmark studies for the brand, focusing on customer segmentation, brand positioning and menu satisfaction.

Another key focus will be on development and how Portillo’s can better move into new markets, which Patterson said will be done with discipline and a focus on restaurant-level cash-on-cash returns.

Development plans

Last year, Portillo’s announced a strategic reset on growth as traffic and sales turned negative. Facing pressure from an activist investor, former CEO Michael Osanloo departed, and with him went an aggressive plan to spread Italian beef and chocolate cake across the Sun Belt.

This year, Portillo’s plans to open eight restaurants, and five have already opened, for a total of 106 at the end of the quarter.

But Patterson said the chain may look to drop some sites on deck for 2027, slowing openings to about four to six units next year.

Patterson said the chain needs to “have the real estate forecast model dialed in” before looking at site selection.

“I think there’s an opportunity when we go to new markets with low awareness, the type of site we choose is imperative. That it’s a site that generates high awareness, versus they have to find you,” he said. “There’s prototype work we’re going to do. We’re going to explore what are the best formats that can generate the best returns to the restaurant, still execute high volume.”

Portillo’s has been working on its four-wall economics for years. In fact, Osanloo’s departure was blamed in part on a lower-cost, smaller-box restaurant not coming to fruition fast enough.

Units in Chicago tend to be bigger, around 8,000 square feet, and can generate average unit volumes over $10 million. Outside the region, however, the plan was to go smaller to lower opening costs.

Patterson, however, said everything remains under review, including build-out costs, saying the result of that work may not be seen until 2028.

Menu and marketing

Meanwhile, the chain’s Big Burger Bundle meal (burger, fries and a drink for $9.99) and birthday cake limited-time offers during the quarter helped drive traffic, especially in the Chicagoland area, as did the launch of new sauces and targeted offers within the loyalty program.

Patterson said value is key for consumers today. But Portillo’s will be focusing more on improving operations to exceed expectations of guests that are paying full price, as well as looking at food innovation to create value.

“So not just locking in on a fully discounted value offer, but how do we use innovation to talk about value? How do we use marketing to talk more about value? We certainly know it’s a drive for the business and where the consumer is at today,” he said. “It’s important, but not locking in ourselves into just going after this discounted promotional model.”

In April, the chain took a 1% hit to comps as Portillo’s lapped last year’s launch of breakfast, which was initially popular but proved short lived. The chain later killed breakfast, saying it was a distraction.

Portillo’s is also seeing more change on its leadership team.

Michelle Hook, the chain’s chief financial officer since 2020, is stepping down, Patterson announced Tuesday. The company has launched a search for her replacement.

In March, the company named Jennifer Pecoraro-Striepling as chief development officer, who Patterson said would be focused on evolving the new market playbook.