PTLO - Earnings call 1 2023

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Operator

Hello, and thank you for standing by. Welcome to Portillo’s First Fiscal First Quarter 2023 Conference Call and Webcast.

I would now like to turn the call over to Barbara Noverini, Director of Investor Relations at Portillo's to begin.

Barbara Noverini

Thank you, operator. Good morning, everyone, and welcome to our fiscal first quarter 2023 earnings call.

the release announced investors.portillos.com. and through our morning read press earnings supplemental can results this we in You presentation at me Michelle today Chief call on Osanloo, With and President is Executive Chief Hook, Michael and Financial Officer. Officer; the

We any based reminder about financial business not and statements market on do business management's with and during forward-looking constitute are future made of expectations that current begin law. update this commentary not future to Let's statements, these results required conditions unless a call our which performance. guarantees undertake are and forward-looking by

Our and may include cause both on statements. materially annual that results discussions actual forward-looking report vary to Form our Form our factors from XX-K of risk these XX-Q,

financial not measures. we measures measures non-GAAP Today's earnings most reconciliations measures. the you for call Any the comparable be GAAP to these GAAP as of will should an We alternative direct this morning materials to non-GAAP non-GAAP financial released make the considered to to measures. reference

we deliver lines prepared open questions. the we for your will after Finally, remarks, our

Now call Michael Chief and President over Officer. let the Osanloo, Executive to turn me

Michael Osanloo

very sales Thank with performance. a everyone. and good I'm you first EBITDA appreciate for our restaurant first by by total XX% Barb, adjusted quarter and earnings We level call. We grew our quarter XXXX you, joining morning, happy grew XX.X%.

able be sequential We margins margin were XX.X%, this improvement. do QX year-over-year and XXXX. both which I'm as also tend And new level proud we reflects dilutive restaurants, to restaurant we to achieved which added even especially that of since X

to this me describe detail more results positive are let momentum. review why well first, Michelle we financial will our but in quarterly I sustain think positioned later,

same-restaurant XXXX us in grew traffic decision sales our comp quarter, X.X%. XXXX. In guests First, and invest the to has first given throughout tailwind for some the

guest the satisfaction. improve sustained These accuracy help higher importantly, This, And metrics believe Our traffic entree guest was remained us turn, Empowering guests give confidence and in of our throughput like leading and performance and power. speed service, transaction in is when leads we've flat. we're But guest creates and operational positive, point highs satisfaction. overall that multiyear our count count that experience, more our indicators satisfied, we drive key pricing margins. are prioritize members team to operationally on our to and sustainable.

We anticipate in margin. investments taking consumer low necessary up other in sentiment, in price XXXX, to strategy improved ongoing price total higher prices, staying in course members. an the team commodity with and our mind, we're persistently up our only with our when in inflation combat sales, Keep wage we've up restaurant-level environment in laggard and in traffic, comp,

economy continues or tiles the as Even be been thriving. uncertain have to

Arizona open Moving and on to is development. of the complete. is XX Gilbert, class

longer-term to already a feed gives Arizona, ability see classic Colony great confidence Texas, underwriting generate attractive is are exceeding Portillo's that of our Portillo’s or is early, returns expectations. hungry or the visits Schererville, which the travels. we're where XX quickly, brand moving the thrilled Although teams Tucson national paying proof to fan. enough at the It in aren't are to our to than if in working And that Indiana strategy us its lines investors. expansion our Gilbert, for hard

X X already opening for to committed locations remain them. the in of We new we've and restaurants announced XXXX,

in recently restaurants. the which we market brings Arlington, Dallas-Fort Worth exciting Allen including and announced this Arizona have X We plans up restaurants the to our location, Queen Creek and area Arizona year, to build

will benefit pickup a as and that of Rosemont, second Airport. Ohio Chicago that entertainment Cicero the is traffic. as our announcement will both likely suburb open in Portello also location later restaurants land X seen from includes that airport traditional restaurants This we Chicago this Illinois, This borders well in You've year. a and fantastic location Algonquin

will are ton it and up, learned of pick as to make the no the the that And dinar. year past our even drive-through operations performance format as second over we the how happy and we've offer in more with a Joliet, This about be first to location efficient. Portillo's pickup of

to continue traditional standard-sized margin to means are have restaurants the but growth, cost We primary dollars the revenue as build. locations the lower strategy Portillo's potential and a for an infill through believe drive our pickup restaurant

this dependent gives way, our expansion us the the self-fund interest flexibility time is rates on our elevated, to tremendous financial markets our environment. immediately. our our to By EBITDA in not capital credit and restaurants our development to an growth. ability continue finance conditions achieve cash and remain flow to advantage We're flow generate cash

performance, our solid on happy recent we're with for laying important core it's focused constituents. to X value foundation our remain that While delivers a

This, care Our team the and guests us an turn a investors. with that of value. nation. guests to to turn, grow expand delicious We as the in offer exciting investors food near our opportunities profile team returns great both members, They in and delivering unbeatable deliver over ride. healthy us economic our our our by at our for members long-term superior across take generates we enables

that, a With to me let share Michelle quarter. hand off few more on it details the to

Michelle Hook

everyone. and Michael, good Great. Thank morning, you,

recap I secondary Before recent results, want our our we discuss offering. first quarter to

price an to Class the A of the to Class company's the offering purchase additional an stock X shares end, per company's its of option $XX.XX quarter This exercised common the underwriter stock. quarter, A offering shares the at share. completed of XXX,XXX of we common million Subsequent

pre-IPO B shares All of by the offering sold the in A shares Class represented members. and owned

to proceeds subsequently Berkshire, and IPO our We firm XXXX shares sponsored in equity Portillo's in used that private acquired XXXX. the primarily from the purchase

X, B of funds A shares shares represent and the represent After remaining XX.X% these April Class Class the XX.X%. XXXX, company. beneficially of XX.X% As approximately Berkshire own transactions,

the attributable increase increase was in XX% attributed restaurants same-restaurant quarter by for turning results a in during were million check revenues new we The XXXX to an first and which the in an to QX, opening top XXXX. by driven $XX.X Now growth. X.X% sales an X.X% strong in compared change in was increased Revenues This reflecting our $XXX.X average saw where of primarily increase line to quarter, a and the and of an of million, menu to was increase or certain increase partially prices, first increase sales X% offset average XXXX. higher approximate transactions. Same-restaurant X.X% of in check the in mix.

in our increase and sold revenue percentage delivery increase offset prices, an the of in as revenues at XXXX. Cost X.X% compared a quarter due This of third-party the first was first to commissions. goods to primarily commodity lower flat XXXX of was XX.X% of in by the quarter

that inflation expect and for the to continue will We inflation mid-single-digit are commodity overall year. commodity ease currently estimating full

in the partially revenue quarter XX.X% percentage as increases. incremental in and first from of Labor of efficiencies, hourly XXXX the was investments to decreased increase of a operational team quarter in in by first driven XX.X% This XXXX. offset our rate the revenues primarily our decrease including by members,

average As a of rate and first prior increase quarter, versus X% a versus our of end represents hourly the XXXX. represents XX% the year increase also

members. expenses compensation feel wage million cashless insurance card to operating anticipate remain our are to or care of a and timing team operating and of compelling primarily higher package fees in expenses, benefits good continued increased our investments taking We new XX.X% the transition about quarter restaurants. $X.X supplies Other committed credit to we repair for first we XXXX. higher the XXXX and making and teams. as providing We drive-thrus, really expenses in of This due opening and maintenance of how was

driven by primarily X%, or million and $X.X XXXX in restaurants the increased expenses Occupancy of new opening XXXX.

X.X% XXXX decreased in level primarily revenues, As first to adjusted increased the $XX expenses million $XX.X revenues. a in percentage of quarter quarter in million of first our of an the from XXXX. XX.X% increase due occupancy to EBITDA Restaurant

is profile QX We strategic which continued EBITDA through quarter efficiencies to adjusted of versus on in a elevate XX.X% quarter XXXX improvement margins top to in this quarter Remember, start. the adjusted margin restaurants have EBITDA level year, accomplished of compared pricing new of XXXX efforts compared the initiatives. improved lower of level opening first the and of operational fourth versus Restaurant sequentially this implement experiences, of all first all and XXXX. margin this past first XXXX. were the guest quarter XX.X% to of to XXXX our our deploy Restaurant

in January, by We necessary. prices menu menu increased prices X%. progress can increases increased we towards approximately improve believe margins power still X%. we we fiscal May, On of as by XXXX. to we for pricing, beginning combat approximately to have our continue restaurant-level At pressures EBITDA These and use the adjusted pricing goal cost inflationary

pricing monitor will and We strategic moving flexible in remain environment approach current our and continue forward. to the

Our value for focus our remains great a guests. providing

quarter in the and and in of licensing Preopening XXXX the from first of X.X% $X.X led driven first to $X.X was salaries million X.X% increased the activities of due versus XXXX, XXXX related million adjusted first All an XXXX. location million the openings. of from to timing XX.X%. restaurant and quarter of Our XXXX an increase $XX.X by The G&A first software an to geographic new in $XX.X the our in increased This increase and EBITDA quarter XXXX. the quarter primarily professional to of million expenses the in was quarter XX.X% in of to increase of wages in first first planned increase XX% quarter fees. in of expenses this increase

first the from of line, the increase XXXX Below an primarily expense environment, revolver million term quarter by $X.X driven first increase $X.X lending rising improved the with in was XXXX, of offset interest million rate the partially our loan the interest facility. and by quarter associated terms of XXXX. This EBITDA was year-over-year

we we loan February million new term new a $XXX On $XXX facility. X-year revolver into X, entered that and million announced

a of $X.X also loss XXXX, first extinguishment we the debt. During of recognized on quarter million

on million the the loan in benefit tax million effective end of of quarter first the $X.X rate of first interest of first a decrease was the from of was XXXX, term the XXXX. the $X.X quarter, X.XX%. Income As quarter

rate tax for the the first Our XX.X% was XXXX. of in XX.X% effective quarter quarter versus

due equity tax in of or loss. million valuation taxable and ended an effective quarter in share increased allowance ownership, income increases A which with the increase cash. quarter-over-quarter increase to We an our in $XX.X our Our rate Class

is self-funded growth bottom-line by delivering growth top XXXX and beyond. Our committed flows We to cash and remain our healthy line available in our and operating cash.

to that, you I'll Thank your with for back And it turn Michael. time.

Michael Osanloo

to decades, anniversary. maturity like we're XXth I'd ways, the started. but closing, the growth we companies just curve after our in In celebrated part Most reaching of that mention just would getting Michelle. be many Thanks, X

value-driven have to fans built as We for And beloved we worth decades a create much a expand an so enhance in memories develop XX delivering new we our years, of the create have on across you. that value grow and for and opportunity our atmosphere point. at enduring the we after to price members, experience will nation. team to menu our continue for energetic guests brand was a portal delicious Thank investors. Even

questions. With open that, please the Q&A, let's to for turn line operator,

Operator

Morgan [Operator first Brian comes Stanley. from Instructions] question Harbour Our with

Brian Harbour

on think the side, just what checking think, Maybe you're last was on from rolling year. pricing I my off replacing sort of notes, I back just

the of as you've seen to through guess, that, like to is just generally comment you'd And anything curious, year? the I'm April some sales, progress? So I the extent, philosophy on just rest going more on

Michael Osanloo

priced about where talk year if actually hair pricing, Michelle pricing. behind purposefully. very smack head have me last know were me we about upside just April. And talk But I Let will on the I we a

for sure X%. we're if are not we're kind decision we transparent, -- only any haven't pricing. We there's May. We going more price totally don't in lapping -- we not to pricing made of price. And how on So we're need X.X% a being

are. on a pricing and and pricing in But we But inflation. lap know good You go-forward depends we'll up we the lot a October. is feel on where with some we about commodities much what really air, very of basis see it labor in

pricing We will the that seen. have that our guests our some us highest scores of also the feel really taken, good we that are tell at value scores despite ever we've

the we're pricing. for value we that providing really So the good feel about

Brian Harbour

of be with is to wage the impactful quarter. think would is the pace seems you hit? workforce, labor the labor your part that pretty on keeping in in more to well is too, investments terms Is controlled of -- just more outsized therefore, those just you and industry? Or maybe any the in making particular investments But And kind in on kind was would it -- that about there side, quarter Okay. where any margins? increases labor expect of like like

Michael Osanloo

Michelle to handle that. I'm going let

Michelle Hook

I take one, Yes, that could Brian.

as period. we're So markets But that We I also do make to all we QX investments make just to we that we going appropriately. the do that with every say depending will move additional in increases continue frame. may rate like typically But market, QX the that need year of we within do assess adjust generally operate in rate may time we rates every within like will that to we labor and how year on standard increases.

Operator

comes Our next from Zackfia with Sharon William question Blair.

Sharon Zackfia

Michelle, of talk half. want you the what cadence about Does versus price commodity second inflation kind the the of kind running the confer I I could you're second -- question. on of following of the just was mean And that then hoping you expect in back quarter quarter? current the and last for X.X% to

Michelle Hook

first. commodities take I'll Sharon, Yes,

to know this some improvement from this course improvement look well is to still to we over commodities sequential were do And moved, I we XX.X% the seen the of point, that see that that the at mid-single at don't about sort inflation. the last but year, where half have continue but I QX look be, then this when that at improvement to digits So sequentially of see we've will see year. expect quarter. at how we expect were as QX We've modeling of when TBD in at X.X% been expect quarter. we'll there. back what inflation I you I year at of continue

of And running look put to at question, within that will your us that we terms be QX effective -- generally pricing. would you pricing, when in at X.X% so range. second QX, were answer

got pricing but that timing it place play. last pricing when had we what today. year that shakes as in expecting in see versus us We of or here in where we that's to around right place we did the into we But QX in that were lower, comes when even As Michael it slightly possibly out the mentioned, was this year put of put rolls how where higher. terms slightly sit the we're replace that off we will

Sharon Zackfia

of the just I Omicron in we were in transaction Or and stuff accounts to wanted reflective said up, see flat happening on of from that know distortion entree on kind touch I is is the an related where ago then quarter? entree would something And the different gains, transactions transactions ongoing year up business were you flat. early really which basis

Michelle Hook

Yes.

Sharon, I think, -- go you ahead, Michael.

Michael Osanloo

bit a Sharon, but think also massive a is Well, transaction it is channel swing stabilize. you stabilize what up. picking had mix little dine-in informative. of in stabilizes, mix to channel I to I drive-thru think now a I think it's more -- and that and beginning I from described, little dine-in is back our channel will also And our mix be as think We count our

Michelle Hook

of of there to lab. that is because Yes. what just at add would And year the was Michael Sharon, outweighted an on I is the beginning saying, the impact Omicron

quarter. And we seeing of industry, so front rest we're what that no that favorability within been part that different the of the you've did than with the see

Operator

Tarantino David Baird. from question comes next with Our

David Tarantino

the QX. I general, But with the guess, sales have wanted the the March. what out the necessarily the least quarter quarter on at uncertainty seeing asking a imply at moderated the the update wanted And benefited probably that think just basis for get viewing just point. and year-over-year maybe business know this I sense trends for expected results I in I part Omicron traffic there an I of the level and to to may And come weather. from how your metal a and Michael, early But trends. on of was I'm given back you're consumer. confidence not to the you're in trends

Michael Osanloo

Yes. the leading most are what indicators. confidence, honestly, me the gives David,

tend our reasons their speed guests suggest they and are at have it service, they that, to experience, would If of our a when go So good a look a the they back value to restaurant, cycle. go a have experience, restaurant visit post delay they people a scores, they back. repeat restaurant. those visit good I They don't

we fact confidence is good they're me a the performance see lot what that a can momentum year. the that having that of us and are experiences is gives maintaining that the of so guests rest our of throughout sustainable telling And lot positive our

of what doing. lot me that's gives confidence So a we're what about

David Tarantino

the side, you're at when you the or looking And consumer you far? then just understand it proposition and your pricing evaluating on what wanted secondly, perhaps would room suggest I what Great. to to have value are you've taken indicators still too

Michael Osanloo

our value number different do X-year the at look competitors. to about We -- Yes. what our what are. we of I literally the our at feel -- what hit. scores most we mean a are bundle track believe getting ask popular Portillo's. every at of popular compare survey, very We be value Those We most -- guest how bundle most carefully we so to you you're them things. likely

is an feel we so restaurant. people our Portillo's bundle. is one bundle than their every $X, look we indicative at And we of between pick compete bundle and that. in versus $X We expensive and most bundle, what cases, with, great popular our the that more some Like about $X their

So necessary, what us lot gives price appropriately necessary. And confidence that can if is a little a that a always value bit that combination represent are we of we if we then proposition. priced

to your not happen price. that idiosyncratic I all know comp a to think, we grow transactions. What's grow Prices your to it's healthy your things try offset -- healthy comp don't I via in to via lever, is P&L. really

up years. XX% when cost last going XX%, we've increased of go a the to is you're XX%, couple price our to when over labor So have commodities on

of can historic inflation, You're of a when But a then little have that bit of a price. love the I being provide is that the level part going bit. on we great price of little not magic And value you're to Portello you that, think guests. of value. think sharp we that moderate increase to our sort formula We is to above all, seeing

Operator

of Sara from comes question Bank with next Our America. Senatore

Sara Senatore

a quick and then a question. follow-up Just

of transactions, that's the smaller parties On was the sort to why negative, more check potentially. channel out, so smaller maybe shifting assume just mix that, I your mix settling on parties,

So I the that anything attach or have mix. else to wanted seeing of that just kind any you're would affected clarify if lower

do I And then on restaurant question development. have a

off-premise how else bit the If land could know a I further there lessons maybe But about only. talk anything you development. Chicago some first a the us bit you on comps, to that the said you give is, just even of to impact were anything dense a building tell about more anything just more. given from for already don't that cannibalization reason that had market market us sense out

Michael Osanloo

bet. You

the me handle On about Chicago talk development, and let to look, development, incredibly good Michelle mix Let I'll question. Portillo's. is

And Chicago, levels very it of doing very, build when gate exceptionally attractive well, we revenue, the restaurant a very in of out high margins. so comes

market. So it thoughtfully the and selectively in is on us Chicago incumbent fill to

remember, catering. Walmarts run And the We then planet. but an excited. location It just to make I of pickup isn't. Joliet there's who on the Algonquin, a in area home Cicero busiest live our minutes pad one say in to to really to XX, pickup, We're it drive of on think need hole is location. their it experience. So a absolute it's easier. we’d People isn't super in drive-through Portillo’s, It's it's like and the to XX dine-in a pickup fantastic coverage. going What us. for that the get be

then But done of on a truth that guide bit very little some. things has here. -- that we've is well. smaller Joliet probably kitchen have for a We can little wanted third-party And tighter we -- delivery own we we for the overbuilt think for discovered do It's we had and doing delivery our that the there's we a that So and pickup. well. some build restaurant can very I busy everything that restaurant a footprint, it's

And the in want built to we that we make did into sure than have so Joliet. better we that restaurant

markets of this pickup scale. wonderful infill building is bunch in those Sharon, I think as a we're I more And can location in other before, I've looks. said master a that we and Chicago achieve imagine Portillo's local strategy. that So to a continuing how And pickup us

Michelle Hook

we can mix, generally, So plays Channel look as come things you mix into into that bit of course Sara, year, But you it. I I -- next what seeing take is are per attachment, been a transaction. over question. the what think, When a last talking there's so little mix. half continuation you're lower the the had at we there's where of seeing about less know, items back of multiple

So et bit get in seeing still little But mentioned, transaction as a or drink that's bit in whether there cetera. we're of a that mix. That's seeing we're a what seeing less in count, generally add-ons, but do aside, little channel we're as Michael growth well. you the

Operator

next UBS. with comes from Our question Dennis Geiger

Dennis Geiger

adjustments given Michael results opens, about maybe count share maybe and dine-in the for how to no if many restaurant of generally to underwriting underwriting juncture performance assumptions total going Michelle, Can forward strength the that? I opportunity, plus including, this think, expectations any talk your exceeded mean might thoughts of wanted about, this recent slight kind that at cases. that I there's on ask in over what you of time,

Michael Osanloo

outstanding a an question, I'm I punt bit. is apologize because for going to on and it It

especially these new we of We getting are with comfortable our the going total through are market, formats. at looking now process that addressable

Portillo's that to as including as so going late modest more we're and is an pickups expectation nontraditional going what to we're one fully are well venues. we go through market, is standard think have addressable what And in restaurants targeting September, our we Day and full believe our Analyst potential, a our

things look So franchise. that. try we're to what at like think a we other also think going do we can international take with And and regard to airports,

speak September. now off we'll a think, what very fulsome we but cuff have to about about in conversation whole don't So the I that's a process. want right that

Dennis Geiger

that. to look We exciting. Very forward

already as for one et situation, themselves, go timing more of year. this that cetera, and there? but you're new it speak chain Any on Just some, the targets touched your think track relates side, see you've done on Obviously, And color then. the to on on we you permitting this the the one year other I the improving build -- how where through environment sort full as Any what that but. commentary year. supply you more the and for

Michael Osanloo

glimmer but going not it Look, I both, describe a of I'm think much than as there's more to that.

chain chain certainly the up -- is a we're supply So the freeing seeing hair. supply we're -- seeing

And so we're we talked part the quite that biggest about more time for not this a this heck have permitting It's as the X nervous why lot than are The still processes. we ever loaded. did is a permitting I restaurants we've that in we're budgeted of issue the a of the all about of ton past. reasons new And think before of that We've it. year just time. added one building back-end

QX, They're is of all because because QX, permitting issues. it

So up but on improvement not How of were. want it's the moderating, And I'm seeing I to cost we're add not But a seeing little -- you think they ton is there. going bit chain, more I'm -- going they're Michelle, not free that? to we're a fast that? flowing. as to seeing say supply getting not the as that anything

Michelle Hook

to that, point. to just I No, Michael's would Dennis, add

not is side, the availability getting little The moderation better. he's we're any good hefty what increases. cost news seeing On is we not correct. about. previously from build exactly talked We're seeing bit a The

ability get year. to the shapes XX to half Michael's built how that within about those the the and the And our out. we timing good feel point we of so of put out But class see back there we'll

Operator

Jefferies. Barish question Our with Andy from comes next

Andrew Barish

you settling basis? sales on update on an Would to kind weekly in Colony. that's like A of share quick average where

Michael Osanloo

I one It's is ] the that It's just just eye. will top my confidence accomplish still or about of give to is restaurants it is doing say a in in [ us puts It's momentum. Andy, It company. all well, Colony -- a really, to continues it it lot a we is -- say, to continues can X in crushing Texas. is of really on it. what -- focus what X our pace -- flow expectations. outstanding be I'll of maintaining our

Andrew Barish

restaurant-level this inefficiencies Yes. X and 'XX? maybe, the half modest year, mean, mean, that. given Look with forward on restaurant-level that to back margin some versus I improvement we seeing Michelle margin as improvement, for kind of should for and the the Michael, I just of it. margins think of associated

efficiencies wanted do to think the more the to I then that would color any you of get the business some little to we And helpful. of more color on that Just well. get sort labor mean as on wage way inefficiencies? the some of be out fund as kind a investment of of and kind continue a bit I of NRO of

Michael Osanloo

Yes.

the the And ask let me handle second. Let Michelle first.

right XXX% smarter our getting you're Andy, So are efficiently. run that about how restaurants we to smarter and and smarter

that area XX, spruces kitchens retrofit of is of suppliers back then don't continue existing prep we that to to that So we members for call team letting our want kitchen the us. outsource actually enjoy salable in we're the Chicagoland some prep more do, the the which stuff our out moves some of up into do And restaurant. is It our don't doing. line. It what we And rolled recall a the getting market. at smart

puts of eye-catching it It's does labor. it. I'm doing actually a -- why It the inside restaurant. let like quite that's But we think and that not us with more sales, -- a upside -- grab-and-go a but there's beautiful, it’s we're of not merchandising got efficient in in little it's terms bit be

FTEs It's reducing X day. during that's and big for between So a the unlock of somewhere X potential the got us.

kitchen They people things other how deal. can because big us. Those a is to conveyance designed. for was be that's so do don't moving it's need And a the of lot

is do is big us. and XX letting continuing suppliers kitchen to them to the a unlock, So for big prep for another unlock take more us

Michelle Hook

can Yes. restaurant-level Andy. I And question, the tack margin

for So full XXXX. right, to point, the looking modest I year am improvement your versus year, full expecting at

the comping food looking key on QX, as as XX.X% over year, other input mentioned you you into in see at costs, labor, margin But we obviously at last QX and the costs. compares those QX can You being look get QX, et cetera.

continue I in those our going to behave, And remarks, so as going we're where be at. think drive we approach. at look to right, pricing in margins coming And my that's how flexible in mentioned as we see I to

take pricing this in in in to month and increases reaction just continued us labor. the saw particularly additionally You we're commodities that seeing

that's behave. I'm full the And to improvement quarter-over-quarter to how so it's XX. stick point going margin the But to we definitely that, year, yes, versus unknown for just expect going

Andrew Barish

And just follow-up on quick remodels. a the

the us a was trying you Or the are to you when of have Do many this those how taking to on schedule get XX. number to in half think of I expected year, have year? you're share kind first the with to were XX place? willing

Michael Osanloo

wanted to just into rush I -- it. not We

So we merchandising a bit time section right exactly little of to restaurant how took we bit -- of and beautiful. the make to look little that the out is a figure what took

a of quarter. So the third in I start we'll deploying suspect do these beginning that heavy and lot that lifting

between So much and back-half-loaded a is XX% And it's dynamic. we're XX% very targeting -- still it Chicago. in

Operator

question next Securities. Our comes Guggenheim Francfort from Gregory with

Gregory Francfort

this system historically? have of has in the meaningfully that? $X year performed the the I'm market one I seen year I context come How on pretty I you of recently on The Texas, And just first they Cassini above if been thoughts new guess AUVs. volumes store you asked Arizona. any -- the million outside and a Just this your the within of wondering new had substantially couple sales have on maybe think in guys And the Sunbelt store openings one was I kind above in might performing?

Michael Osanloo

well think we the certainly have Colony I there partly in could whether bragged not were Look, and Yes. some or I because survive do or questions Texas. about

Greg, of important The rest outstanding. class the is about to doing the felt I talk of the performance of ‘XX, So economy.

So is Indiana is killing it. Tucson, Gilbert, whether it Schererville,

extremely of the Class And so happy 'XX. we're with

that all a expectations, a going it's comfortable going As got not single it, very our that's restaurant every we think and run about right? we're And class, crush underwriting We're to it. every year. single how it beat to we've have of on whole

expectations, as to ‘XX is, Our Class and a comfortable we're goal class to doing is of our that. very underwriting beat

lot restaurants a that That why that now out build. kind of we think find we confidence a -- and me to to to of I there's build, are on build, Honestly, that where going can model replicable figure how outperform. a to we formula gives

excited really as class I'm excited. of I'm 'XX. just So the about

restaurants now, I if betting going over bet I going announced -- not I think I'm that are be outstanding. how I was, on the I think already 'XX that to be. be I'm we've but to a of certainly would cost

Gregory Francfort

Awesome. And maybe one then Michelle. for

maybe end the one the low around offsets? guess rest as that the beef And to look inflation if maybe in I into I the and can embedded bit years. Just of a few it? able kind topics you the And where range. is kind the of you the mid-single-digit remind suggest of you stands, inflation we of would hedge towards beef next us think basket you're of is are the there the the in year, drop What single-digit flat that to commodity hear

Michelle Hook

no problem. Greg, Yes,

portion know, about total beef of the basket a XX% as particularly of you flats our that. in So heavier is being with beef

that what alone. we at have the of on the XX% QX look flats, about close in XX% for done we've that with we hedged the remainder of with that, hedged year So to when on

So good -- to along internal But versus able are this beef in as that budget going that to line expected feel was at elevated be in right, item. below do at and about that particular, we that we our looked 'XX line in still you're prices we've year that we item, 'XX. being all lock

basket, offsetting and deflation our XX%, chicken year. We're our between the proteins some look make I XX% in seeing somewhere over of think X just basket. particular, proteins right that, of up this other what when the at in on those pork you're you seeing items other

onion before, increases that mentioned fries our French then are seeing in as I've of increase. some buffering we heavier as But and that's rings So well.

And that's us hurting at so 'XX look as versus we 'XX.

when at and mentioned, as of we're I goods the hedged. But the hedged are for basket look the still We we are year. XX% today, at about overall where flats full

the with portion that. And being the flats so strong of

think QX we still where exposed the our little see QX expect but point, particularly and about So both beef items within sit. I a we to do and some burgers, good in other to QX. of some bit We're feel I deflation your on like

Operator

Stifel. O'Cull Our from with comes next question Chris

Christopher O'Cull

planning was open than a shorter from to it 'XX openings I higher is few this Class frame fell of number the a understand the the of year, initially Michael, company planning. but in time into a units significantly of

could as So such like that, resources, things I are speak of you to was and that hoping you openings? these availability that teams the to -- training might clearly need going support to

Michelle Hook

opening some I into of in honestly, is bunch great more differently. we cost slightly the phrase that a missed it 'XX that, 'XX. a it's It's deadlines that slipped Yes, Chris. would we're question, not

we're team that plans one the me always restaurants the 'XX. to an the So experienced of help. thing have the for the been General 'XX to that that leadership plan matters to Manager Michelle the opening has Portillo's for most to And is every

said, believe to management. I sure this the what it derisking restaurants key is you these experience would you, open investment to I If making well, is tell

GMs of we're class And of the the X who of for know targeting one are. so 'XX, rest restaurants every the we the

In who fact, the of are. 'XX, the the class we the know restaurants GMs that Class we're for targeting

a that, so to And important me, is massively unlock.

We team. opening you've got the on right? NRO can new operate they teams as team, but have out department, restaurant the where fire the it's help wonderful market like new NRO You've analogy is -- restaurant be people our then people full-time opening the got necessary. And way volunteer in would a

very We've just this us when in got So got Arizona place. point, team GMs members for open in we've we place. honestly in easy -- super at it's because it's experienced

at Texas we talent -- announced legs in with Colony, getting really open it. that sure Creek, overinvested more will restaurants GMs under X they're their make Texas. I We're Clean we are So already to seamlessly those well. the quite and that's where them. suspect, Colony We in can the in open -- opening --

to factor. the not outstanding when team, And open and but a that's good position, great NRO because experiences in get members gating it get good in really so And just I the guests from [indiscernible] an we not comes we're the comes can really, and open, that's it management, enough, open like it team feel when it to way give get-go. and

Christopher O'Cull

How great. been Has new the No, mix system? maybe that's the and the other in -- of the mix stores? representative it been these menu some is of Colony

Michael Osanloo

normal beef any an there is selling mean In is than heck sell sandwiches oddity these which Colony, I of with our the is we're more a for that sandwiches actually, of at although I a little restaurant. restaurants. general, think out-of-market yes, I an lot more that we have a

which the by sandwich investors' in minds, Beef So traveling boy, some the a I Italian travel? now, actually does it Texas. because this And back think is way, -- is of wonderful in

-- just of a it's truly it lot item. And an menu gives it me iconic comfort because

much you If in you to want come an Italian us. pretty be sandwich Texas,

sandwiches the for love lot fact people beef very that will I I people mixing a so it's gives the some love in confidence sandwiches those it then B better are to that back coming food of high. our maybe the than And those fact me coming travel that because and and expected. concept again,

Christopher O'Cull

you a during the was agree. I the drag encouraging on And a do how lastly, Michelle, quarter? drag. think believe That's margin that. you called I Yes, performance to restaurant just out hear much as unit new that then

Michael Osanloo

Yes.

that, quantified haven't Chris. We

Obviously, exact not so our Michael to And expectations. you to, exceeding number. I'm alluded going an it's as give

be be in it's it's mentioned, restaurants, totality make drag you of the we've servicing just guests, because going bigger drag year year particularly sure to But first you're So a I that some restaurants than as et opened, to at you going know, be about would in Chris, Michael cetera. to right, profile as point X, as a the additional they labor of the quarter, with staffing as normally that. would to the you're definitely the it talked up that look

of in drag, we that, It we're more was as you're new particularly on. spot -- had not bit QX I'm So not openings. but quantifying a a little

Operator

further This today's concludes questions at time. this There no teleconference. are

You this for your may you time. at your participation. disconnect lines Thank

Portillo's (PTLO) 4 May 232023 Q1 Earnings call transcript