There's no question that early investors in Chipotle Mexican Grill have been amply rewarded. Since the company's initial public offering (IPO) in early 2006, the stock has returned an incredible 6,000%, even after the bear market carnage of the past year. Chipotle was a pioneer in the fast-casual industry, bridging the gap between fast food and sit-down restaurants, offering value and quality while elevating the experience. As a result of the company's unbridled success, investors are always on the lookout for the "next" Chipotle.
With that in mind, Portillo's (PTLO 4.86%) may be worth a look. While investors may not yet be familiar with this regional fast-casual chain, it boasts many of the same attributes that helped make Chipotle a household name. Portillo's steady growth, loyal guests, and dedicated employees have put the company on the fast track to long-term success.
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Loyal -- and hungry -- fans
Portillo's is known for its Chicago-style fare and street food, including Italian beef sandwiches, Chicago-style hot dogs and sausages, char-broiled burgers, and its fan-favorite, homemade chocolate cake. It also offers salads, crinkle-cut fries, and milkshakes.
The chain works diligently to maintain its value proposition, which has attracted a large and devoted fan base. Portillo's has die-hard enthusiasts and repeat customers that frequent its 71 locations in nine states. Not only that, Portillo's has a strong direct-to-consumer business that has shipped more than 2.7 million sandwiches to hungry customers in all 50 states.
Happy employees make for happy customers
Since its inception, Portillo's has taken a people-centric approach to its employees. This gives the company quite the competitive edge in the restaurant business, which is known for notoriously high turnover.
Earlier this month, Portillo's was named to industry publication QSR magazine's "2022 Best Brands to Work For" list. QSR cited Portillo's "secret sauce" as a combination of "a strong employee proposition and a culture built through decades of centralized growth." It also noted Portillo's industry-low turnover rate, its internal promotion rate of over 80%, its robust employee benefits package, and the company's culture-driven approach and values as contributing to its ongoing success.
If that isn't enough, the company was ranked the No. 1 restaurant company on America's "2021 Best Midsized Employers" list by Forbes magazine.
Show me the money
Portillo's is noted for having among the best unit-level economics among all fast-casual restaurants too. In fiscal 2022 to date, the company reported an average unit volume (AUV) of $8.4 million, among the highest in its category. That's up from $6.9 million in 2021 when it outpaced Chick-fil-A ($5.0 million), Shake Shack ($3.0 million), and even Chipotle itself ($2.2 million), according to QSR. In fact, Portillo's was ranked No. 1 in the industry for the past two consecutive years.
Even in the midst of the downturn, Portillo's has delivered enviable results. It generated revenue of $151.1 million last quarter, up 9.5% year over year, primarily fueled by 5.8% same-store sales growth. This resulted in earnings per share (EPS) of $0.04. To give those numbers context, analysts' consensus estimates were calling for revenue of $149.3 million and EPS of $0.03, so Portillo's cleared both bars.
But in the midst of those robust results, there were challenges. Higher food prices forced Portillo's to raise menu prices, which increased 8.2% year over year, something the company only does as a last resort. These lagging price increases hit adjusted earnings before interest, taxes, depreciation, and amortizaton (EBITDA), which declined 10.7%.
Portillo's continued its measured approach to growth, adding two new locations so far this year, bringing the total to 71 to close out the fiscal third quarter.
Value for your money
Given the macroeconomic uncertainty and the ongoing bear market, Portillo's hasn't been immune to the carnage. The stock has fallen 60% from the all-time high it reached shortly after last year's IPO. As a result, the stock trades for just 1.5 times sales, placing it squarely in bargain-basement territory.
To be sure, plenty of things will still have to go right for Portillo's to become the next Chipotle, but given its strong momentum, the company is off to an impressive start.
