PTLO - Earnings call 4 2023

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Operator

Greetings and welcome to the Portillo's Fourth Quarter and Year-End 2023 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Barbara Noverini, Portillo's, Director of Investor Relations. Thank you.

You may begin.

Barbara Noverini

operator. you, Thank and year everyone, our quarter fourth Good earnings welcome call. full XXXX and morning to

Our these press today investors.portillos.com. Michelle With President XX-K posted Chief Hook, me are earnings and commentary on release management's required performance. Chief and Financial the results are not and law. and future forward-looking We made our expectations Officer call Executive not conditions are is unless Officer.Any Osanloo, statements, of current future forward-looking which about business presentation are by Michael do and supplemental update based here at statements on guarantees

identifies alternative that GAAP after forward-looking materials.Finally, of results Osanloo, statements.Today's open XX-K let GAAP most to these of call morning's to included which we we Portillo's. to lines over deliver are to cause these me to will for call our measures, make comparable this reference will measures. Executive Reconciliations Our actual prepared Officer risk measures your factors and earnings non-GAAP questions.Now non-GAAP from an vary Chief their remarks, the the not in materially financial posted counterparts turn may President our are Michael

Michael Osanloo

note. basis sales adjusted and points the us XXX Barb. the grew share a year quarter, everyone. morning you, total for EBITDA on restaurant million margins to our In sales quarter and X.X%. happy Thanks fourth increased XX.X% $XX EBITDA XX.X%. restaurant-level full on expanded great X.X% Same approximately XX.X% Thank of quarter million. grew transactions to high to fourth fourth that back adjusted $XXX year by increasing and Restaurant-level XXXX joining a I'm Good call. had earnings for to we the ended

average sales $XXX XX.X% adjusted volumes XXXX, total Restaurant-level EBITDA unit the grew with of year year Same restaurant fiscal increased to million $X.X restaurant. and we ended per grew X.X% operating million record Portillo's. basis to to For approximately XX.X% sales to cash full we a and year, XXX flow by level for points expanded XX.X%.And restaurant-level XX.X% margins importantly, by the $XXX for grew million. we

into drove the success. Let's factors the dive that

We our were we're First, to come the a an we for we best for believe coming guests We and experience to abundant food This outstanding and sustainable drive environment. revenue play. the just the quarter, is traffic X the engaging price margin expect. excelled know serve operationally they've on way overall number growing in were was fashion well. orders the The flexed multi-channel job outperforming result We flying is create known we delicious pick-up fourth were In current satisfaction point. did give way we catering and humming, and our QX, we net in a performance, in peers. business. keep did our muscle our We revenue nearly most great and a promoter that. value of back.In and them off our at fantastic guests highs our and drive-throughs score strong extremely a guest shelves the in of delivery multi-year XX dine-in, to

resources catering such a a to ordering our with in provide as guests we dedicated touch XXXX, concierge example, experience. in new For invested service high

also events. large We to our scale ability strengthened handle catering

will grow driving Arizona. continue workers holiday help that served The major frontline in to we by this X% occasions example, our We our the Chicago catering both can theme Today, only of opportunities to new and strong overall of expanding excited marketing sales channel know are investments catering markets. grow more. about channel We're channel. a to these to airline For meals about us this catering additional represents the across it be this is revenue. and there overarching and

sounds they of that market our simply Portillo's. So season, reminded the we why discounting campaign Chicago smells the an in of we ran to in brought holiday to up largest Portillo's advertising and lead fans love forefront.Instead traffic, marketing, speaking of to the in using the drive sites,

If adding you and message ads, And this a you linked see haven't operationally seller.Based best seen we how we our version Portillo's, variety and can of the to as consumer our driving know relations we we category, as the simple We've forward signature pivot fresh-to-order chicken a dressing. space all more our the we're like forward well a to system-wide for are restaurants to yourself XXXX, we've XX we salads share already heading salads got going can utterly you salads, you can we and this including data, to we've year, don't chicken the know, in for XXXX excited carryovers menu craveable $XXX,XXX sense in work in per it already to investor do seriously just the the year competitive That have however Portillo's lot we want. you the have salad that and a traffic continue created with new single as means way, be in and are growth. got out as and self-fund and salad I'm is on X of from includes in quarter. development. X for another items one initiatives. generates our our strong menu in salad that under let's honey driver. add committed a restaurants the test to salad. XX move website In we'll future. to take XXXX, we these to look the innovation traffic is tested all what to we also menu, and well and of pecan peppercorn we This importantly, with us. least the of already as in year growth chopped expect new beloved ingredients very can on at planned soon.Now I'm by this gap permanent leverage restaurants momentum prior One this than sales tools five to XXXX already restaurant soon.As be add, Like to craveable. excited to year. them at a make our fourth can new rolling new We've opened a are be X really what and nine most year menu a of you so of per also selling all We've Both X fill most they pipeline, add more spicy made chopped which construction, into customize opened

expansion.Now told sick that we economics, unit the bragging of for been everyone into Colony extremely other right Our The talk cash coming about restaurant with put class that some the new business XXXX. I've me our about I'm of immediately in of generate is out restaurants the growth back of results all in and the of happy fund flow further to as markets particular. Texas, let's so stars

Texas Worth, and Florida opened Claremont, Fort kitchen our and strong with especially both out-of-the-gate impressive efficient have layout. new

opened second Illinois. our in We location Rosemont, pickup also

looking a just for the except fundamentals We it's drive entering we're We're happy We this the and with and as the delivered invested to we its really executed have from on excited a year finish in continue everything learn success to to for that our and class awareness. value capability, being building model essentially grow. model continue dine-in about we're business incrementally and continue has the factors of will driving we're a so forward In XX protecting the potential this Houston sound ended. We proposition. Remember great brand a and drive-through. foremost lot XXXX, flex tools, our XXXX Portillo's how to by the traffic and that driving to strong quarter market we first XXXX.All operationally of years. for Portillo's made told, on

kind It's to financial our We secret a me over how great it continue great great food the Michelle. point our in a experience against results playbook, saw and XXXX.With price we that, drive us so is to at you let hand execute providing from of sauce.

Michelle Hook

Great. morning, Michael In you, everyone. saw line top revenue good growth. QX, and we Thank strong

in or with restaurants, increase same sales quarter, last compared X.X% in opening of During $XX sales new revenues average an million the by the of increase in driven million check $XXX.X the increase menu driven prices certain reflecting in driven partially was higher by increase product X% was were a restaurant restaurant same to of up combined an check X.X% transactions. of and XX.X% by The offset fourth average X.X% increase mix. X.X% by increase primarily year, an approximate

excluding week operating in in year, We days. this fiscal XX.X%. The in fiscal week, revenue quarter resulting Day increased XX XXXX the XX quarter the last included versus XX Christmas XX six have approximately weeks weeks fourth

weather have in first You quarter the our industry. and due seen winter all headwinds performance choppy to consumer during

don't expect we year. We to the are of to immune but our rest that, not that derail

single algorithm Our long-term low growth reflects comp. digit

updated be to through delivering but different revenues commodity from partially inflation This XXXX.Labor, and the We lower was offset the in XXXX. revenues, in primarily prices. quarter labor X.X% and in in of increase the percentage decreased in increase an later We estimating nine increase fourth decrease the while estimate target XX.X% prior stay our were we primarily remain our in on expect of currently three new years XX.X% consistent unexpected partially year and deliver rate rates least XX.X% higher and inflation quarter overall Hourly of revenue with to revenue mid-single decrease when primarily periods. to this of delivery of as to new up an hourly long-term of to commodity X.X% in XXXX. recent restaurants our commissions X.X% at percentage outperform, the two including We fourth year-to-date from to trends XXXX by offset incremental Development the to the will any a quarter labor decreased openings XX% of class The our at morning.Moving comp and restaurant as beverage today.On currently release in revenue given we growth are mid-teens average quarter on confidence growth. hit we our this have opening quarters. increasing costs, things our issued sit in first positive outlook September food, committed we each can feel packaging continuing and we development XXXX We in an by versus investments increases subsequent growth members XXXX third-party growth fourth by costs digits earnings are in of team open annual up we new quarter in no of was quarter there fourth here expect driven the front, as due in and with a XXXX. also on the commodity variable-based quarter Day, long-term revenue, targets. in utilization in one that our to the years target the in outlined basis our compensation. our happen These of when the and fourth Now on restaurant and in

the restaurants currently driven XXXX by opening XXXX in quarter $X.X compared to XX.X% repair higher fourth increased fourth estimating or maintenance as in XXXX, expenses new restaurants. Other as driven of opening million quarter fees, credit was primarily XXXX. to the digits fourth X.X% expenses utilities primarily in are the $X.X We fourth and XXXX, operating and in of card increased of the inflation mid-single which of by of million well the the new expenses.Occupancy quarter labor quarter or the of compared

Restaurant-level to driven As of to of includes an adjusted XX.X% $X.X versus adjusted impact revenue. strong prior occupancy XXXX million compared of adjusted a improvement EBITDA Restaurant-level X.X% year in revenues, week. due quarter-over-quarter. of fourth percentage of XXXX, expenses our XX.X% basis in increased EBITDA in by were EBITDA in decreased the quarter of XX fourth XXXX.Restaurant-level the $XX.X million points an increase the the XX.X% quarter to fourth quarter approximately XXX margins a

XX.X%, was EBITDA and also beginning the XXXX delivered. full points was XXX a of improvement of basis an which in the restaurant-level we at versus increasing XXXX, fiscal adjusted said our focus year For our XXXX.As margins margins the we year year, were

of guest which level adjusted was restaurants elevate all is ongoing new start. improvement on restaurant-level have operational top efforts deploy a to profile of This a our and margin Our actions, to in in opening result EBITDA lower efficiencies. of record implement experiences XXXX, the strategic margins improvement pricing

May. reminder, execution our We We we disciplined will actions additional X.X%. of and in focusing focus an by and on continue XXXX pricing shareholder long-term a a value as took pricing, strategy.On operational in to on action XXXX, X announced development January pricing in driving of approximately recently January

This our wages $XX million in as to $XX We price new action first fourth and XXXX. pricing recent million. due X% to the nearly quarter and decisions openings. increases inform XXXX, coming increased in an will and positions landscape our plans effective increase the expect and of cost the the sentiment campaign, the in in continue from the benefits in to X% to insurance.In to of of to $X pressures, we ad quarters. to competitive as XXXX general the as increased filling million currently by in to puts execute restaurant XX.X% monitor to growth well decrease quarter the expense XXXX. and was general open offset consumer compensation expenses variable-based of The of partially rate of higher compensation, was number administrative be our of from quarter Pre-opening between Chicagoland to fourth driven executed quarter million XXXX.Our in expenses increase attributable expenses annual planned increased revenue higher of administrative by and The by quarter advertising X.X% expenses $X.X timing our XX.X% fourth equity-based the and XXXX primarily due of fourth us increase

All due of in of $X.X an fourth costs XXXX We increase the XXXX in keep expenses pre-opening XX as to EBITDA XXXX. XXXX, includes well to for week. $XX.X quarter the non-cash of or as in expense adjusted estimate restaurant's opening. deferred to million versus Please quarter Adjusted $X million XX.X%. impact as EBITDA prior of includes reported of the million million $XX.X actual $X mind million our rent well this approximately be to in that the pre-opening expect as to expenses an our fourth between led incurred

decrease million For the fourth line, the XXXX, of quarter our were the our EBITDA margins compared full improved with in XX% associated of loan from of EBITDA and XXXX, facility. XXXX terms year by driven XXXX.Below million $X.X fourth This decrease primarily quarter XX.X% a expense for adjusted the XXXX. to was interest term revolver lending was $X.X

revolver today, are borrowings As the under outstanding our of $XX million.

was interest XXXX of XXXX.Income quarter for the for in rate effective fourth and had Our XX.X% we tax for of million versus was million benefit $X.X XXXX year. income expense X.X% tax an $X.X the

fourth driven change rate in of a negative XXXX valuation effective quarter Our tax for was by our X.X% the allowance.

by the company's future in equity-based ownership effective partially rate for decrease Portillo's The a was increase an by income tax offset and awards interest primarily in are will fluctuate year XX.X% in net XXXX. effective rate X.X% Our the of operating the tax effective in versus the increase our as forwards.Our in invest. rate ownership loss valuation was OpCo, A carry tax allowance recording Class equity as increases exercised and driven

reminder, some our by activity by a into from operations to the capital for the restaurant was year-over-year pulled existing forward as as record to the Cash of new pipeline. in driven motivated restaurant operating quarter cash year. primarily new our openings base the flows This we weeks strong our any growth we from restaurant of XX.X% self-funding to million capture $XX.X the by growth. invest new number solid year. in across operating restaurants, expenditures future revenue of many As We're for our possible that margin XXXX and in fourth openings XXXX, XXXX expansion.Note support increased

build may see spend based $X.X million You $X.X cost accelerated openings that staying our we to shared of the to class million restaurant are within average the to previously CapEx needs. the have even for In pipeline CapEx openings. XXXX of fund of to the timing Having future to quarterly said $XX XXXX.We to restaurant to QX and this we of our new timeline wave are committed XXXX, of XXXX the bring CapEx that, lower million on million, we flex range carry year, expected operational cost. be our first which range in these other build will $XX addition and an into remember, estimate

investments builds, are capital, in our XX% CapEx We our XXXX commissaries. be projected XX% that investments on including and restaurant on discretionary currently new XXXX including early of X% builds, restaurants, other in estimating existing on will spent

deliver confident long-term morning.Thank look with our that it to time in and in execution continuing release and your brand, our Michael. on earnings to turn was back you forward are outlook our strength that to for our We the this of I'll operational provided

Michael Osanloo

Michelle. Thanks,

Before revenue teams year guest them are satisfaction. pleased the our we to day. how new reiterate operating about we and I've questions, we never to by been this guests the our we and these flow, with of cash single delight our with and about traffic Feel more possible is adjusted open digits. future. team for grew of positive ended double made frontline members. you. proud restaurants, in XXXX, without want progress I multi-year we our in thankful every results XX EBITDA record generated We extremely highs folks I'm our and Thank None confident great opened who great

Operator

question [Operator Instructions] Blair. William with first comes Our from Zachfia Sharon

Sharon Zackfia

questions. going year. Two inflation you're probably it labor Michelle, expecting to price sounds you're away the all commodity and not this of like

marketing thoughts margin So be could of how of what any and in then if Chicago density, you think for of talk flows given kind And success some on sense? there have plans in give might where this make that helpful. can other I year Michael, think the markets Chicago, you might would the are be that year, you this where you restaurant-level whether about marketing

Michelle Hook

yet. pricing, approach into in Sharon, go going I'll early so as address first the still any made we we're we year Yes, decisions haven't to the year. how this question. It's On and pricing

a little know, want inflationary we all with generally now offset bit consumer that approach is you shaky. though, you As pressures to that price. said know Having our that always take we right an the

be careful we we how And approach need pricing. on so to

we pricing. competitive that what to continue on any decisions going further how the looks like assess consumer is, landscape we're before so make And to

margin restaurant-level the in XX this we this bringing when your the base year, restaurants do plus into we're year, to that going new look we some see question, margin of terms restaurants. from portfolio open at those plus the degradation to In and X expect

of you they're year X, gate percent going doing they in As come don't that know, be XX-plus the teens. margins generally out in to high

those we do margins year. impact we expect as to so this restaurant-level And approach see restaurants

Michael Osanloo

question, on really it's it's then think your I but And traffic Yes. marketing, driving.

Chicago. works have traffic. but selectively undeniably comes muscle it use, to and a well to really that in when use we campaigns It So we to TV we ad like drive

Arizona I Indiana. think in we're approaching a markets like us scale could and for it work where

arrow to have in to. that. we if excellence. paying do that. we already We're And Sharon, people it and I in our so We're investing to already that that certainly quiver we way the though, won't is need best operational drive traffic hesitate honestly use think to

So the a guest back back and comes less frequently. is a comes difference great guest good between frequently or

we advertising, excellent is that But balancing operationally most that important use our the innovation, appropriately so we're to have sure to we course, PR so tools machine, new traffic traffic. think And probably that make expense. driving of to being have use we have we'll we have we and menu versus drive lever other

Operator

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

Sara Senatore

Just a bit little into I comp. guess deeper more that of a dive

you in the time. driver Or improve the drag guess guess advertising versus just One fourth And we I think in what of that fourth bigger extent better was new I markets? less being fourth mix sequentially to quarter think to that's the share perception then So curious but the as so and has markets all an the market. you if see understand for that's we your is was about the X, a fourth I quarter. I of outsized a and the about to the know Chicagoland driver about trying quarter, should Chicagoland, catering just from actually traffic the quarter been over talked that fair did of the that across comp core maybe always sort in than tend comp? a your

Michelle Hook

Yes, question, Sara. I'll catering take the

say year approached that QX little a year. we we comparing we season versus year, for last would I impacts remember as So last had us heavy this as only were bit weather catering of catering that in

push yes, that it out that, weighted it at wasn't call look perspective. I a so But mentioned, quarter-over-quarter, see said our time, QX, it over catering opportunity wouldn't from when Michael outer we as particularly markets. having growth us is for did we out a but catering, I think to in real weighted, And anything in in

continue towards understand we And this guests of what Chicagoland. channel making that have our to is work so that's to we're going that outside sure

Michael Osanloo

theme masters Yes, X I builds. multi-channel we and right part better who for little broader think folks one channels. those to of There's to to us do our proud a how who capabilities, important the theme are is we catering it's that which is and of lot catering. now people are to trying get each drive-through flexing incredibly One is, are of us, at are trying of learn a at

are of We good all at channels. these really

so look And goal we catering performance that get think catering, more is And more the we at versus growth we in know better. we tailwind there's our that opportunity, our and core the markets. in can

about catering. that's one I we're drive-through a excited as of so that to be reasons dine-in strong for as is us And delivery. want think We channel the

the that's sort So big picture. of

acceleration across probably second Your in were trends. about pretty of bit I question little consistent the that us Midwest. a with campaign The we of an saw the all say would for advertising theme markets. our trends Sara

markets of So positive across very, very that for the trends had quarter. fourth But certainly our helped. we all

Operator

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

Christopher O'Cull

the just top advertising the really inside drive had in mind Chicago brand on keeps advertising, Michael, just important experience of question by I'm strategy but I need more follow-up brand? a just seasons the frequency and a not during for curious to have delivering consistent the on store, why the that I appreciate

Michael Osanloo

think honest not with we we're to exactly telling do and everyone what We're going I you. comfortable to totally when, the I First do. and thanks for compliment actually, just be

that's during and a cycle state but I trying do we is pulsed And really to market the advertise tough will you anything as in spend. have continue to Chicago appropriate. an out secrets, We of that. like I'm election think telling not

out back we're in shouted local year anywhere would not of advertising half this We the country. politicians. get the so probably by And

going it selectively. you going money to going necessary imagine if and returns we when So Chris, to I do when those be spending we're spend think We're going opportunistic dollars. say, and comes can advertise, on want as advertise that dollars. to this we're to get don't to got great quarter. on to in I it more advertising be to this those to like formulaic we're We much ad

Christopher O'Cull

And new at point class then when particularly early XXXX, you units, units of units, to the time, similar of at curves of sales Chicagoland? they those look continue do the 'XX new classes outperform outside your a previous in

Michelle Hook

know, you Day of as Class out of AUV Chris, at is very year $X that 'XX in how put was Development Yes, at Chris level. and million 'XX, that we new the really class young. frankly first trending

X just QX alone. the in So we X of opened

So but me tell, Fort and new it's so what called at we're just markets. performance, look right very to any really of it's said, I'll particularly because to out XXXX which early He for too the happy Worth outer point is, it's early on to Claremont, Michael but now. really those you Class when make the too about commentary

Operator

with question next Our Piper from comes Sandler. Brian Mullan

Brian Mullan

speak year, this or related Colony but just kind roadmap? The And do see question a of how Can to great Allen effect that Just and a talk you any Fort you're then openings of Worth what's observe? out went? to market. the curiosity, Texas, separate cannibalization Arlington on in start off into at that the Houston you And about the can you entrance at

Michael Osanloo

X great excited in four we're happy first open open, The to not soon. we're super from going Texas. good been I about that's Look, over is a a been a had from the about that. people response has mean, We've ridiculously surprising. our Colony restaurants gone how with DFW. ago and fifth We've to really year I consistent Yes. think little year,

We have brand. strong very a

base. We lot demand There installed was have for us. a of an

And you of a visitation lot so catchment. that outside that's that see normal think of I a first year

visit Austin Colony. from You driving Houston I heck, to XX have people people we XX, and miles. the us had at mean, driving

So that's of course sustainable. not

great still Alan we're been expected fully we starts. year, slower. down Worth Colony off seeing But great has So the slow performing this well. to bit and a that Fort gotten to Those are Arlington, exceptionally have little a bit starts.

recall that that I maybe you'll You at ago X, a we're know, months don't mall X it shooting. that was, that had

It's Fort think Colony. And at mall so Arlington, a performing that Worth has same It's performing depressed. pace not whole or as the the well. still been I bit just

continuing So build excited there. scale DFW and continuing DFW.We're about to we're super we're develop in to

We think will to restaurants the of Worth, year. first Houston I going Dallas-Fort our this strong. in come gate few we're open that out Similar to

for worth that going us. the modeling for what All is as we of be have it's good done, it's says to Dallas as bit every

We that population to sort Houston scale I'm us. for see of time A excited I'm ingress, we And great make all tailwind, matter so the to we have took growth get how locations. in And us. excited have grows to sure that plus some great demographics, things to locations Houston. quickly have our great visibility, to very great great egress,

Brian Mullan

question a on just follow-up then location. And Illinois the Rosemont,

location on term learning to how is start might these prepared the should across to that touched or you for you're a broadly doing anything expect first there then could maybe remarks, one, longer mean, more second a a you format? think on deploy formats I but of bit that little thinking the little to type just be we and that elaborate and be when relative I year little a next little system? the

Michael Osanloo

we Joliet, walk-in space we And we all realized that exceeded of how the the many I It It as underbuilt We was not We probably and walk bit first teams. the very the amount think expectations. Portillo's business. built was think people is doing a When were overbuilt we of little fantastic. our underestimated frankly, And was food. Joliet kitchen. well. in Joliet, learned pickup, bigger. would Rosemont order we Yes, from I up for well-prepared necessary quite for Joliet,

have So we need that on we walk want and counter iteration we're Do a friendly learned tried all go members? eat Rosemont. the model, sure right and we bit ups probably want to and one Rosemont, that to to we then that grow the is enough we'll and tweak make team in just to line? Are I And at food have a get in so to our have for we maybe? who people we've to appropriately everything space learning aggressively. Do kitchen that their to come all and can more perfect of and stew hit that, we my expectation of learn.

Operator

with Barish Our Jefferies. next Andy comes question from

Andrew Barish

implied Yes, a guidance on it little was guidance. store bit. sales, couple a same kind noted of you Michelle, more maybe of on versus of sort things margins explicit down

units XX, bit New closer the really kind of bit week to digits. get starting point but little that double really to matters of a 'XX, kind of to to below EBITDA out it in the trying for down just kind adjusted a growth adjusting XX a what there? Is extra distilling reasonable are low little

Michelle Hook

to our of future, we operational Yes, units Michael efficient XXXX, any that that we're mentioned don't I online, not and obviously be for. I we margins coming against build ways pressures we expect plus retrofit I if XX can as the margin the terms margin always well as on within think Andy, to the another we just guidance, and have given his that to of year stale something as these to talked we're think just that growth units in here, I we mentioned at look a look some new 'XX, a we With give remarks we short-term coming this can X out to see for have to aim cetera algorithm, it's to long-term in aiming combat we for year operational last look, to continuing you guidance, restaurant that prepared short-term but the XX as layer the are have the we in new And year. right? new restaurants you units, when phenomenal year. know even hit in of perform that as lot look any continue et of a still at as but that's we efficiencies more play continuing as we fact, look we've obviously But you you I can, become kitchens possible. right, Kitchen to degradation. the to buffer think do know, terms I say from again, lot yes, teams so of though, going of so But that going that and as to but going always units as give in we as how about all X you the plus from getting quickly as that will again,

without So in giving I'll explicit guidance comment that's what Andy on XXXX.

Andrew Barish

you've No, the sort dovetails that and of that's like kitchens place the really Derek handful with to and, in was very helpful that? things a back and ask, willing team your and of anything I my had for put of new follow-up. changes the operational years in labor and last is productivity measures the really kind couple going deployment and pocket to into with or 'XX, of effective you're have around share remodels it kind kind us, of

Michael Osanloo

Like kitchen, did streamline efficiency Andy, some -- get than the Like, the we GOs, for think restaurants last it. XX latter. to nailed I year retroed that gave have do think I wanted. the to it's more you just, Chicagoland we members. team grab our in Michelle guidance XX we probably think and I she to

and have XX mean, doing it I We It's another this our year. margins. that's protect helps we're real. helpful

we the kitchens, we more productivity improvements. our and kitchen excited better staffing, lines new these, every more element of and our little the seeing learn have better. getting more are. the Our we We're shorter The deploy

we X basis. that passionate And so closet what 'XX We're sort We're a so about more on great in same of go-forward in restaurants. it's did of want efficiency. lean sigma really in to think I at get the our and people, we

Operator

Our next with Geiger from comes UBS. Dennis question

Dennis Geiger

considerations I saw a for anything add if in know bit One, little bunch how year? key Michael, those about talked the drivers. strength the drivers, to Michelle, about you you other I year? thinking those year, going thinking traffic broadly traffic the you in play how there that the or into more you for means Any of year and single-digit momentum at the kind traffic this Is a about that had and comp. talk this of what you level on given low traffic are 'XX. assume QX. all about for could momentum high I know long-term spoke given you're you're in that else this a quarter to this

Michael Osanloo

a eat go important I most in to say, an you lunch very, choose about take seriously. very the to traffic restaurant like to to great a organization. dinner. Dennis, get really think important of And go probably metric because experience. all my of want go is health would traffic experience, the past something obviously trends people we where you It's I is when or and Think reason for

going said, delicious last a I to that had and Man, somewhere time and craveable. great it go experience You're there was you it's

healthiest traffic to consistent I be think the way a driver. that's

have to course, toolkit. of an Now you need entire

our got but If bad, part of is so drive-through. part great great experience is our And the toolkit the one, flexibility. toolkit of you've weather's is preeminent channel

have If weather enjoy. we have can delivery, we and you great great, beautiful have great We that restaurants catering. the outside sit is

So having to think campaigns to awesome.I we market entertaining quirky channel going aggressively. be an ability going whether up really new visitation. is marketing to flexibility be really some that's buffer. traffic I think salads, with And doing that's to have our a coming it's Having important drive

test that and guests a two margins. to I higher and coming amazing out to panels and they new investors kitchens salad. little in because think restaurants bit our price point And it's our our salads drive and got going in going better are to mix the incrementality test the love love we've

one that the pull company are those time. of no that to think I you lever the there's kind all do. a that's needs lever things And magical the So

balanced be sure make our we level And are what healthy that a you're to will pulling. transaction to have in whatever growth. have of levers levers use You commitment we necessary is

Michelle Hook

is onto menu And is the in our boards having that, digital Dennis, one restaurants. of powerful we very I'll things know add that just

point Michael's within to a market think year. we that whatever the core, utilize how think you or we pairings talked Portillo's I things to drive I massive back to into things. matters. there's opportunities the messaging other the so of to And campaign, of whether And advertising salads those certain menu earlier home we we that's and last some restaurants core on be Portillo's or but new to all half about want, And assets on those classics it's and pivoted we the you that within don't effective, our market Portillo's have in how to or boards, whether found have outside ad

I a that's So well. think powerful as tool

Dennis Geiger

saw behavior changes that fourth support parts, whether anything quarter of in highs, it scores one think customer just you relates traffic, that it's guess you the Michael, satisfaction then I there to maybe strength all-time the And days what you helped day Anything about as more and as to your which about you flag it that you across shift with would quarters? else prior guest of talked is the terrific, channels. a the saw to some versus else know, that I was relates the strength week,

Michael Osanloo

that. improvement. broad pretty consumer. and versus would great not no or say broad anything good question, weekends based was it think It feel Dennis, a It's was really that. about or that, but based weekday was segments It unique versus a lunch dinner It of like I I we was

Operator

Tarantino Our with next from comes question Baird. David

David Tarantino

wondering traffic is on you're Portillo's the I think of are actually. past? for as Or is I so traffic, speed than was in focused of potential service Two going a just on and different big it questions, just One, wondering you're that forward making, comments Michael, sort dovetails on a that some whether what your more of driver? just something opportunity you the off thoughts

Michael Osanloo

where, remarkably service When might talk in point the drive-through we are and of drive-through we're for know, that we speed David, secret emphasis incrementality internally look, yes, mean on about. times service, have of a But donâ€™t sure I service I very the that the that X% through in the a is we well. want know to in to a improvement of a incremental even didn't exactly sort my Well, be that that what revenue represents time packed, it flows sauce is our comp. strong XX

operators the in as right our maniacally So drive-through. drive-through. service, number have on same focused the just It's on still frankly, are but it the now doesn't dine-in X important, relevant in of less impact speed

for person it. it, Drive-through Yes, but their How them capacity don't us. of in about you're and you fast guests talk like in. so get perception fast We'd almost just if like speed time next be how they emphasis literally getting with just math can the huge to out matters, moving not And the and of We in service and of happy that. infinite enough. absolutely matters. the to and out are do

David Tarantino

guess you thought end the opportunity versus this you have was new year do to markets I answer, guess but speak? now think year were are have I the of a operators, want kind less you and be that my now I and of where or more bigger maybe to at year this how speak? and so or maybe following that maybe you speed that that to going are new now is next to experienced And you about to where you is of so guess previously? be locations service follow-up I your on where where

Michael Osanloo

and or a there drive-throughs. is their your perception of on guest you That want satisfaction of, there's I which do service, through speed something of like, to matters makes time is get not. you Yes, of is separate them ways their to the think speed say speed happy took of it think service? in what One it service. on speed absolute Then X customers about just to terms

all improvement when less that tendency well perform speed, for We're And these have a things it's room other act. on best. we a think you purely near a balancing to we I there's material matter. accuracy When on were really our at nowhere there. on focus always

So is, adage of the old of for sort gum walking and us, same important time. chewing it's at hugely the what's

need So fast, but accurate to we to also be need friendly. be we and

And so those balance. always are things a

driver traffic a a as think rejigger us rebalance that we and pushed for this little perhaps the we'll of well. we'll that's and And hopefully friendliness that to I have and bit. accuracy detraction year speed

Operator

Our with Harbour comes Stanley. Brian question from next Morgan

Brian Harbour

in on timing was the the shed like? in margin what what like from with had a any on a of I consistent looked you Was 'XX planned of could expect you margin fourth versus you there the impact QX just timing quarter And light what openings kind or might QX questions. of sort couple any the perspective?

Michelle Hook

Yes, Brian. was expected. No, as it

and into the you November openings openings K so those you look, there. whether in we can release, when months earnings Our see that or the heavy give at December we look it's open the can the you restaurants

as the it, right, that first right, Brian, look food it's at, still training, those quarter, side, to within inefficiency whether period, time side. heavier going coming the the so, And X-month labor yes, labor heavy on you're heavy call first always be on the or again, into you on side, the on

then new you'll cetera. think the et impact in of see, versus little And the end to towards write in QX to we in and of layer restaurants then XXXX three would year, back and tail be one QX, two start I QX of class then But of this where of remember that's part more the first so bit in half. a the that

I So bit more yes, class from impact six, of the weighted the those particularly you'd a coming into in little QX. QX out 'XX think see and

Brian Harbour

year, that inflation anything regards of mind drivers you or the was it relative should And quarter Anything inflation there was. to on just mix we expect a than the and any with keep said bit we Were even what food mind would've pretty the in keep coming in think kind then I into just I thought in cost? ratio, of fourth to your cost should food would you year? product then throughout higher little

Michelle Hook

call hair where versus When X.X% thought Yes, in what in more the bit being for our and as heavier are a what QX be where come the yes, into of right be play think just call think nothing impacted. we're about QX seeing us maybe it these would some out bit At we out goods moderated. then again, I on, based I'd basket that's would terms we least off of more little looks based a at. where QX we more came QX and be but just heavier in impacted QX was QX little maybe at pressures we that were bit in look and to higher, thinking today. projections say a I a of XXXX, of Brian, But little might I'd QX

Operator

Our next with Guggenheim question Francfort Gregory from Securities. comes

Gregory Francfort

questions. X had I

I sizing the but in there know be kind first first early expectations a to like lapse week, thoughts you impacting short-term, of you can for don't much how talk to The is might the guys on and comp Michelle, just quarter? what impact XX address maybe right based you any the quarter on weather

Michelle Hook

Yes, impact. Greg, the there's so no comp,

comp our at we So number in actually it. comp week is the has XX-week a X.X%. that XX that And Christmas because did purposefully

comp, we skewed QX. bit you XX-week look comp were a little the in higher if And so would've when a to do at, it

felt where honest of the And reported that's XX-week doing fourth of the quarter. terms we nature quarter so what's because actually that more in in we in the true was the a business comp

Jan going week because no XXXX. X QX, weeks starting comparing XXXX therefore starting So there's when come Jan continue X we like-for-like that into week impact X Jan to in be Greg, to in we're to

weather the to, back of of just rest in for be the has I'll the point, that in the at impact health QX not no we the seeing of about not the may to just we trends But So on about the how et immune your impacts February. holidays, seen to of of in feel Michael's of us, address of but industry, really weather consumer's as whether about impact look really feeling business are in the performance on we the were the terms well performance how regardless comp as good choppy the in health this you question year, and January. cetera, outside on comp. QX, feel January, the we think a but as To good the business, not absolutely, we come industry that

so about what I QX. say would And that's

Gregory Francfort

talk Phoenix just, a I five now What there. up to maybe market? in market? little Michael, are you it, I maturity? is you've are hitting then have you as getting And that think stores looking What five the other what as the Phoenix stores have, it. Can Got think benefits you market. scale changed to about path go. you maybe you has are like markets hit a where seems now you now It

Michael Osanloo

bet, You Greg.

Michelle allows demonstrable even It's get leverage the to in But scale. P&L of we chain, cost little you staffing restaurants one We had. area improvement some in And the six you scale we of dynamic on the went so, gave the quickly. margin a distribution really we supply are dissertation and from just when that a have in us and are to and impact in Arizona, two Valley side and have seven scale. Tucson scale wonderful Arizona when four, the synergies because approaching

that because peppers thing does for synergy, that it it us beef now you're with have second relatively The is on craving bread, you delicious crusty close. revenue some dip when creates a one hot Portillo's sandwich

little to to one the minutes that the only or on one of valley other have drive something closer. of. XX you a don't know You There's side the the

more Phoenix. be scale building we're to we're don't we And once to in market. to achieve got synergy publicly tends more restaurants we're we -- in there -- that I We're leverage that know a early market restaurants announced so scale. getting. at that of we're stages And planning definitely that in the if going still scale We've revenue

in P&L both it exciting but also terms things. it improvement. you'll you of And So margin see across super revenue, they're the in see

Operator

you session. of concludes question-and-answer for reached We the our your participation. today's have This end conference. Thank

time. your disconnect lines at may You this

Portillo's (PTLO) 27 Feb 242023 Q4 Earnings call transcript