With third-quarter sales expected to turn negative, Portillo’s on Wednesday said it is slowing growth and cancelling its test of breakfast.
In a preliminary third-quarter update, the fast-casual chain announced a “strategic reset” that will focus on value to drive traffic, as well as improving restaurant-level economics and more efficient capital deployment.
For the Sept. 28-ended third quarter, the company expects same-store sales will decline between 2% to 2.5%.
As a result, the company also downgraded guidance for the year, saying same-store sales are expected to be down 1% to 1.5%. In earlier guidance, the company had projected a same-store sales increase of 1% to 3%.
Portillo’s is also expecting eight restaurants to open this year, down from earlier projections of 12.
And next year, in fiscal 2026, Portillo’s also projected eight new openings, including the first airport location at Dallas-Fort Worth airport.
Next year’s class of eight units, however, will have lower build costs, averaging less than $5 million, the company said.
The news sent Portillo's stock down more than 7% through early-afternoon trading on Wednesday. The company's stock has fallen nearly 50% over the past 12 months.
The Chicago-based chain had been on a push to grow the brand across the Sun Belt states of Texas, Florida and Arizona after going public in 2021.
In the second quarter this year, however, the brand’s initial welcome in Texas appeared to be losing steam. New units in Houston and Dallas were reporting “flattish” results, and CEO Michael Osanloo said the chain had been lulled into a false sense of security about opening in new markets.
Second quarter same-store sales were positive, up 0.7%. But that was largely attributed to a 2.1% increase in average check, offset by a 1.4% decline in traffic.
On Wednesday, the company said it will focus growth on core markets.
“As we advance Portillo’s growth strategy, two priorities stand out. First, driving sustainable traffic through consistent service and value. And second, disciplined development with restaurants designed for strong unit economics, attractive four-wall returns, and efficient capital deployment that will fuel long-term growth,” said Osanloo in a statement.
That effort will include simplifying operations, and that means the company is discontinuing its test of breakfast, launched earlier this year in Chicago.
In the second-quarter earnings call, Osanloo said that if breakfast became a distraction, the chain would kill it.
Apparently, it became too much of a distraction.
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