Release Date: May 01, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• El Pollo Loco Holdings Inc (NASDAQ:LOCO) reported a 2.6% increase in total revenue for Q1 2025 compared to the same period in 2024.
• The company successfully launched Mango Habanero Fire Grilled Chicken, which drove trial from new guests and showcased the potential of menu innovation.
• El Pollo Loco Holdings Inc (NASDAQ:LOCO) opened two new restaurants in Q1 and plans to open at least 10 more in 2025, indicating growth in their restaurant footprint.
• The company is focusing on improving customer experience through investments in operations and a new customer feedback system.
• El Pollo Loco Holdings Inc (NASDAQ:LOCO) is optimistic about its brand relaunch and menu innovations, including new products like fresco wraps and quesadillas, which are expected to drive growth in the latter half of the year.

Negative Points

• The company reported a decrease in restaurant contribution margin to 16% from 17.6% in the previous year, primarily due to labor inflation and higher operating costs.
• Comparable restaurant sales decreased by 1.3% for franchise-operated restaurants, indicating challenges in maintaining sales momentum.
• El Pollo Loco Holdings Inc (NASDAQ:LOCO) experienced a 3.8% decrease in transactions, despite an increase in average check size.
• The company faced headwinds from consumer pullback and macroeconomic uncertainties, impacting sales performance.
• Weather conditions in Southern California negatively affected sales, particularly during lunch hours, contributing to softer performance in March.

Q & A Highlights

• Warning! GuruFocus has detected 6 Warning Signs with LOCO.

Q: What are your expectations for Q2 same-store sales given the current environment? A: We expect headwinds to continue in Q2 due to consumer pullback. However, we are focusing on our brand relaunch and menu innovations like the quesadilla to drive growth. We anticipate easier comparisons in Q3 and Q4, which should help improve our performance. - Liz Williams, CEO

Q: How effective was the Mango Habanero launch, and what impact do you expect from upcoming product launches? A: Mango Habanero drove trial and showed that consumers want innovation. We are excited about our upcoming launches of Fresco wraps and salads in May and quesadillas in June. These products are expected to attract different consumer segments and drive sales. - Liz Williams, CEO

Q: Can you provide more details on the impact of kitchen equipment investments on labor costs? A: We've rolled out equipment like holding cabinets that improve chicken quality and reduce labor time. These investments are expected to enhance operational efficiency and help manage labor costs. - Liz Williams, CEO and Ira Phils, CFO

Q: Are there regional differences in consumer behavior, particularly among Hispanic consumers? A: We see a consistent consumer pullback across regions and income bands. The Hispanic consumer is under pressure, but the trend is similar across different demographics. - Liz Williams, CEO

Q: What is your guidance for menu pricing for the year? A: We expect menu pricing to be around 3% for the year, with 3% in Q2 and about 2% in Q3 and Q4. - Ira Phils, CFO

Q: Can you elaborate on the development pipeline momentum? A: We are confident in opening 10 new units this year, and the pipeline for next year is strong. We expect to accelerate growth beyond the 10 units planned for this year. - Liz Williams, CEO

Q: What operational challenges did you face in March, and how are you addressing them? A: March was impacted by weather and consumer uncertainty. We also saw some operational execution issues with Mango Habanero. We are focusing on improving order accuracy and customer service to address these challenges. - Liz Williams, CEO

Q: What is the status of the kiosk rollout, and what benefits are you seeing? A: Kiosks are installed in most company restaurants, with some remaining installations planned for this year. We see opportunities to use kiosks as merchandising tools to drive guest engagement and check size. - Ira Phils, CFO

For the complete transcript of the earnings call, please refer to the full earnings call transcript.