Portillo’s Inc. opened its first restaurant in the Lone Star State market on Jan. 18 in The Colony, Texas, and it is averaging $48,000 in sales a day, said Michael Osanloo, the company CEO.
The Oak Brook, Ill.-based fast-casual company’s Texas unit “has been the No. 1 restaurant across the entire system” and the sales would annualize to more than $17 million, rivaling stores in its home base of Chicago, Osanloo said, calling them “eye-popping numbers.”
“That's a crazy number, so please don't model that,” he said on a fourth-quarter earnings call. “It's definitely coming down, but we feel really good that this restaurant will significantly exceed our underwriting expectations and sets us up for further success in Texas.” Portillo’s ended 2022 with average annual unit volumes of $8.5 million per restaurant, he said.
While supply-chain issues have delayed some planned openings, Osanloo added, Portillo’s plans to catch up and get on a regular schedule by 2024.
“As we continue to expand,” he added, “we took the time we needed to make sure that this [Texas] restaurant opened well with everything and everyone in place to be successful in its first 30 days. Guest-satisfaction scores at The Colony have outperformed the 30-day average of all the restaurants we've opened since 2021.”
Other recent openings have performed well, including the year-old pickup-only location in Joliet, Ill., and new units in St. Petersburg, Fla., and Schererville, Ind., Osanloo said.
We're committed to opening nine new restaurants in 2023, with a heavy emphasis on the Sun Belt,” he said. “We're already out of the gate in Texas. We recently announced our next locations in Allen and Arlington, and we've started work on both sites.
“As we continue to navigate the new normal in the restaurant development lifecycle,” Osanloo cautioned, “our ‘23 openings will still be back-half loaded. However, we're already planning to better balance our ‘24 restaurant openings across the across the four quarters.” The company has committed to unit growth of about 10%. It had expected to open seven new restaurants in 2022, but opened four. Openings in Texas and Arizona were pushed into 2023.
Michelle Hook, Portillo’s chief financial officer, said cost of goods sold, excluding depreciation and amortization, as a percentage of revenues increased to 35% in the fourth quarter, up from 32.6% in the fourth quarter of 2021.
“This increase was largely driven by 14.5% average increase across most commodities, especially in beef and chicken,” she said, adding that Portillo’s expects overall commodity inflation will ease and estimated mid-single digit commodity inflation for the full year 2023.
Hook said Portillo’s had about a third of its commodities locked on prices in the year ahead. “I do expect the easing in those chicken and pork proteins, as most have said over the course of the year,” she said. “But beef, again, expect that to be more of a pressure in the back half of the year.”
Osanloo said Portillo’s has paced its price increases behind the competition to emphasis the brand’s value.
“We think that we have we have untapped pricing power,” he added.
As for The Colony restaurant that was the first foray into Texas, Osanloo said it benefited from a number of factors, including location, marketing and operational emphasis.
“We invested time energy and money in marketing Texas,” he said. “We sent the beef bus down for two tours to generate excitement. energy and demand. We over-invested to some extent with a fantastic multi-unit manager down there … and 70% of our management team and crew chiefs have Portillo's experience. So we stacked the deck to make sure that we can handle these volumes.”
Osanloo added: “We feel like we're we've got the flywheel working for us in the Sun Belt.”
A unit is expected to open this month in Gilbert, Ariz., which had been planned for 2022, but it experienced permitting and occupancy delays, the company said. “For fiscal 2023, we are targeting opening nine new restaurants,” the company said.
For the fourth quarter ended Dec. 25, Portillo’s net income swung to a profit of $2.7 million, or 8 cents a share, from a loss of $33.8 million, or 52 cents a share, in the prior-year period. Revenues increased 8.6% to $150.9 million from $138.9 million in the same quarter last year.
Portillo’s same-store sales increased 6% in the fourth quarter.
Portillo’s, founded in 1963, has more than 70 restaurants across 10 states.
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