What happened
Shares of Portillo's (PTLO 0.25%) were sliding today after the Chicago-style fast-casual restaurant chain posted second-quarter results that were slightly below analyst estimates.
As of 2:40 p.m. ET, the stock was down 13.1% on the news.
So what
Portillo's said same-store sales were up 5.9% in the quarter, driving overall revenue up 12.3% to $169.2 million, which was just shy of the analyst consensus at $169.6 million.
However, the growth in same-store sales was entirely due to price increases as the company raised prices by 9.9% on some menu items, driving the average check up 7.1%, while transactions were down 1.2%, showing traffic declined.
Higher prices help give a boost to restaurant-level adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), which rose from $38.4 million to $42.3 million. Higher overhead costs, meanwhile, led earnings per share to fall from $0.13 to $0.12, missing estimates at $0.13.
CEO Michael Osanloo said: "We delivered another quarter of strong results that highlight the durability of our brand. We feel great about our recent new restaurant performance and are also delivering solid results in our core."
Now what
Portillo's didn't give guidance in the quarter, but the company still has an impressive growth runway ahead of it as it only has 76 restaurants open and average unit volumes close to $9 billion, which is outstanding for a fast-casual chain and indicative of strong demand for its food.
The stock has struggled since its initial public offering in late 2021, but if it can maintain those average unit volumes, it should be a winner. While it's not surprising to see the stock selling off on the profit decline as it trades at a premium, long-term investors should look past that as successful expansion is more important for the stock.
