Portillo’s struggles to compete against discounters as same-store sales and traffic declinePortillo’s struggles to compete against discounters as same-store sales and traffic decline

Joanna Fantozzi

Portillo’s Inc. reported mixed results for the third quarter ended Sept. 29, as the Chicago-based company saw revenues go up — mainly due to restaurant openings — but same-store sales and traffic declined by 0.9% and 3.5%, respectively.

Like many restaurant companies, Portillo’s is battling an unfavorable consumer environment. This quarter, same-store sales slippage was impacted by commodity inflation and increased labor costs, but CEO Michael Osanloo also mentioned the challenge of competing with heavily discounting brands.

“Like others in the industry, we are up against macroeconomic headwinds and the price wars in quick service, fast casual, and even casual dining are very real,” Osanloo said. “Q3 comp sales growth was challenged by this rampant discounting and Portillo’s does not play the discount game. We compete on great everyday pricing for our craveable food and abundant portions, and we know this approach will benefit us in the medium and long term.”

Osanloo also noted that although Portillo’s traffic dipped during the quarter, it was offset by increases in average check size (driven by multiple menu price increases in 2024) and a robust advertising campaign, as advertising expenses increased by over $1 million during the quarter.

Related:Portillo’s draws activist investor, Engaged Capital

Additionally, Osanloo updated investors on the company’s kiosk program, which was kicked off in two restaurants in August and was a “resounding success” that resulted in kiosks being deployed portfolio wide.

“I love making Portillo's more frictionless,” he said. “It's undeniable that our guests love using the kiosks. At the same time, it's undeniable we have guests who love ordering with our front cashiers. No matter how guests want to interact with Portillo's, we're meeting them where they want.”

Moving forward, Portillo’s is also focused on expansion in new territories, with a particular emphasis on the Sun Belt region. Last quarter, the company opened its first Houston-area restaurant, on the heels of its first foray into the Dallas area last year. Portillo’s is on track to open 10 new stores during the remainder of the fiscal year, and Osanloo noted that its current store pipeline will help to grow the portfolio by 12-15%. Many of the stores moving forward will use the company’s new “Store of the Future” build that is 1,500 feet smaller, on average, and costs less to build than traditional store models.

For the third quarter ended Sept. 29, Portillo’s reported a 6.9% increase in revenue to $178.3 million, primarily driven by restaurant openings in 2023 and 2024. The company also reported a 4.9% increase in net income, up from 6.5% the same quarter the year prior. Portillo’s opened four net new restaurants this quarter, bringing its store total to 89 units systemwide.

Related:Portillo’s launches first kiosk test in Chicago market

Contact Joanna at [email protected]