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Why El Pollo Loco Holdings Inc. Stock Sank Today

By Jeremy Bowman – Mar 11, 2016 at 11:26AM

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The fast-casual stock slides again after the company reports earnings.

What: Shares of El Pollo Loco Holdings Inc. (LOCO 4.13%) were heading to the fryer today following another underwhelming earnings report. As of 2:58 p.m. ET, the stock had fallen 9.3% and was down as much 12.6% at one point as investors reacted to a weak sales performance.

So what: The fast-food chain beat bottom-line estimates with a per-share profit of $0.15 against estimates of $0.13, but revenue came up short at $86.3 million against the consensus at $88 million. Comparable sales in the quarter increased just 1.8%, a slow pace for the once-promising growth stock. Even worse, traffic at company-owned restaurants fell 1.6%, showing falling demand, though an increase in average check helped make up for it. 

CEO Steve Sather said the company "was taking the necessary steps to reengage our value customer" and improve the customer experience. He also said that recent initiatives would take time to show results, but he believes they are "beginning to gain traction."

Now what: Based on guidance for 2016, there doesn't seem to be much traction. Management is projecting EPS of $0.70-$0.74, in line with the $0.71 it made last year, and its sees same-store sales growth in the low single digits. It also plans to grow the store base by about 8% from its current 430 restaurants.

Like many other fast-casual stocks, El Pollo Loco hit the market with big growth plans, but the company has consistently underperformed expectations. With a weak outlook for the current year, the chicken-chain stock should remain in its current rut.

Jeremy Bowman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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