Casual restaurant chain Portillo’s (NASDAQ:PTLO) fell short of analysts' expectations in Q2 CY2024, with revenue up 7.5% year on year to $181.9 million.

Is now the time to buy Portillo's? Find out in our full research report.

Portillo's (PTLO) Q2 CY2024 Highlights:

• Revenue: $181.9 million vs analyst estimates of $184.4 million (1.4% miss)

• Gross Margin (GAAP): 24.5%, down from 25.3% in the same quarter last year

• Adjusted EBITDA Margin: 16.4%, in line with the same quarter last year

• Free Cash Flow of $7.72 million is up from -$7.86 million in the previous quarter

• Same-Store Sales were flat year on year (5.9% in the same quarter last year)

• Market Capitalization: $547.1 million

Michael Osanloo, President and Chief Executive Officer of Portillo’s, said, “We delivered sequential improvement in both revenue and margin this quarter as we continued to prioritize sales and transaction growth. We are confident that our strategic plan is focused on the right factors, allowing us to navigate near-term challenges and seize opportunities for continuous improvement. We're now on track to open at least 10 restaurants in 2024, including three full-service locations with an optimized footprint. We continue to successfully lower our build costs as we bring these restaurants online, which will support industry-leading returns on investment.”

Begun as a Chicago hot dog stand in 1963, Portillo’s (NASDAQ:PTLO) is a casual restaurant chain that serves Chicago-style hot dogs and beef sandwiches as well as fries and shakes.

Traditional Fast Food

Traditional fast-food restaurants are renowned for their speed and convenience, boasting menus filled with familiar and budget-friendly items. Their reputations for on-the-go consumption make them favored destinations for individuals and families needing a quick meal. This class of restaurants, however, is fighting the perception that their meals are unhealthy and made with inferior ingredients, a battle that's especially relevant today given the consumers increasing focus on health and wellness.

Sales Growth

Portillo's is a small restaurant chain, which sometimes brings disadvantages compared to larger competitors benefitting from better brand awareness and economies of scale.

As you can see below, the company's annualized revenue growth rate of 8.4% over the last five years was decent as it opened new restaurants and grew sales at existing, established dining locations.

This quarter, Portillo's revenue grew 7.5% year on year to $181.9 million, missing Wall Street's expectations. Looking ahead, Wall Street expects sales to grow 9.1% over the next 12 months, an acceleration from this quarter.

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Same-Store Sales

Portillo's demand within its existing restaurants has generally risen over the last two years but lagged behind the broader sector. On average, the company's same-store sales have grown by 4.2% year on year. With positive same-store sales growth amid an increasing number of restaurants, Portillo's is reaching more diners and growing sales.

In the latest quarter, Portillo's year on year same-store sales were flat. By the company's standards, this growth was a meaningful deceleration from the 5.9% year-on-year increase it posted 12 months ago. We'll be watching Portillo's closely to see if it can reaccelerate growth.

Key Takeaways from Portillo's Q2 Results

We struggled to find many strong positives in these results. Its revenue unfortunately missed analysts' expectations and its gross margin missed Wall Street's estimates. Overall, this was a mediocre quarter for Portillo's. The stock remained flat at $8.91 immediately following the results.

So should you invest in Portillo's right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.