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Del Taco says food inflation hurt 3Q margins

Quick-service chain lowers profit-margin guidance on ‘cost pressures’

Del Taco Restaurants Inc. on Thursday lowered its expectations for restaurant margins this year, citing cost pressures in its fiscal third quarter due to food inflation.

The Lake Forest, Calif.-based Mexican chain said its same-store sales increased 4.1 percent in the period ended Sept. 12 — the 16th straight quarter of same-store sales growth.

Revenue at the 558-unit chain increased 6.3 percent to $111 million and net income increased 5 percent to $5.1 million, or 13 cents a share. Both met analysts’ expectations for the quarter, according to data from the investor website Earnings Whispers.

The company said that restaurant contribution margin declined 170 basis points, to 19.2 percent of sales, driven by a 90-basis-point increase in labor costs and a 40-basis-point increase in food and paper.

The company said its restaurant contribution margin this year would range between 19.5 percent and 19.8 percent, down from between 19.8 percent and 20.3 percent. The company also reduced the top range of its earnings forecast, to between 52 cents and 54 cents a share, down from a top range of 55 cents.

“Cost pressures during the third quarter, driven particularly by food inflation, led us to revise our annual guidance,” CEO John Cappasola said in a statement.

Del Taco shares were down nearly 3 percent in after-hours trading late Thursday.

Contact Jonathan Maze at [email protected]

Follow him on Twitter: @jonathanmaze

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