El Pollo Loco Inc.’s stock price took a dive Friday after a mixed second-quarter report fell short of analyst expectations.
The Costa Mesa, Calif.-based quick-service chain’s stock price dipped more than 19 percent by midday, to $14.86 per share, below its $15 initial public offering price in July 2014.
El Pollo Loco reported Thursday an increase in net income of 9 percent in the second quarter ended July 1, to $7.2 million, or 18 cents per share, compared with $6.6 million, or 22 cents per share, a year ago.
Adjusting for costs associated with the initial public offering in 2014, pro forma net income increased 21 percent, to $7.4 million, or 19 cents per share, compared with $6.1 million, or 16 cents per share.
Revenue increased to $89.5 million, compared with $86.9 million a year ago.
While earnings were in line with forecasts, revenue fell below the $93 million analysts had expected, according to Bloomberg.
Same-store sales grew 1.3 percent for the quarter, including a 0.5-percent decrease for company-operated restaurants driven largely by a 3.9-percent decline in traffic that was partially offset by a 3.4-percent increase in average check.
Same-store sales increased 2.6 percent at franchised units.
Steve Sather, El Pollo Loco president and CEO, noted that the increase in systemwide same-store sales lapped a 5.4-percent increase last year, for a two-year growth rate of 6.7 percent and a three-year increase of 16.3 percent.
The combination of adding higher-priced offerings — like entrees featuring shrimp and carne asada, in addition to its signature chicken — and reducing the $5 Combo menu value side of the menu had an impact, he said.
“We believe this confluence of actions drove reduced business from some of our more value-oriented customers,” Sather said. “We remain confident that adding new proteins to our menu is an ongoing opportunity for us, and, in fact, we’ve added shrimp to the menu permanently.”
The $5 Combo menu will also come back during the third quarter, he said.
“This allows us to return to our winning QSR-plus strategy of introducing exciting new premium Mexican entrees, like the new Chicken and Shrimp Paella Bowl, which is in our restaurants now, to a base of underlying value frequency drivers, like our $5 Combo,” he said.
El Pollo Loco downgraded its expectations somewhat for the year, saying same-store sales would grow about 3 percent. Previous projections ranged from 3 percent to 5 percent.
During the quarter, the company opened 13 new units and sold six locations to a franchisee. For the year, 16 company-owned restaurants are expected to open, and franchisees are projected to open eight units.
The fire-grilled chicken chain ended the quarter with more than 415 restaurants in Arizona, California, Nevada, Texas and Utah.
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