Portillo's NASDAQ: PTLO executives emphasized a renewed focus on operations, marketing, and disciplined unit development as the company reported first-quarter fiscal 2026 results that showed modest revenue growth, flat same-restaurant sales, and lower profitability.
New CEO outlines strategic priorities
President and CEO Brett Patterson, who said this was his first earnings call in the role, described his first 60 days as focused on “listen and learn” work in restaurants across both legacy and newer markets. Patterson said the company is building a long-term plan anchored on three pillars: operational excellence, integrated and targeted marketing, and a disciplined development strategy focused on restaurant-level cash-on-cash returns.
“Everything starts with operational excellence,” Patterson said, outlining a guest-centric approach centered on well-trained team members and consistent food execution. He also said the company has engaged outside partners to conduct brand research—led by Chief Marketing Officer Denise Lauer—covering customer segmentation, brand positioning, and menu satisfaction.
On development, Patterson said the company sees “significant long-term growth opportunity,” but intends to pursue expansion with more rigor. He highlighted the recent addition of Chief Development Officer Jennifer Pecoraro Stripling, who will work on evolving the new market playbook, site selection, prototype formats, and building cost discipline.
Revenue rises while same-store sales are nearly flat
CFO Michelle Hook said first-quarter revenue increased 3.5% year-over-year to $182.6 million, driven primarily by contributions from restaurants outside the comparable base. Same-restaurant sales declined 0.1%, with a 0.8% increase in transactions mostly offset by a 0.9% decline in average check.
Hook attributed the lower average check to an approximately 1% decrease in product mix and said menu prices rose 0.1% in the quarter, “reflecting increased promotional offers.” She said Portillo’s did not take additional pricing actions during the first quarter, but did implement a 2% pricing action in mid-April across select menu categories.
Promotions and limited-time offerings contributed to transaction performance in the quarter, Hook said, citing the Big Burger Bundle meal, a Birthday Cake limited-time offering, and the launch of new sauces, along with targeted offers through the Portillo’s Perks loyalty program.
Hook noted that April trends turned negative by “roughly a point,” primarily due to transactions and mix, as the company lapped the benefit of a prior-year breakfast pilot. She also said the company expects continued headwinds in May as it laps a prior-year “BOGO Beef” promotion.
Margins decline amid commodity inflation and higher operating costs
Portillo’s reported pressure on restaurant-level margins, with Hook citing higher commodities and cost deleverage associated with new openings. Food, beverage, and packaging costs rose to 34.7% of revenue from 34.6% a year earlier, driven by 1.8% higher commodity costs “led by beef and produce,” partially offset by menu pricing net of promotions.
Labor expense increased to 26.9% of revenue from 26.6%, which Hook said was driven by deleverage from new openings, higher benefits costs, and wage inflation. Hourly wage rates rose about 1.5% year-over-year in the quarter, partially offset by labor efficiencies.
Other operating expenses increased 10.7% to $2.3 million higher year-over-year, reflecting new restaurants and higher repairs and maintenance. Hook also pointed to higher utilities and snow-related maintenance and removal expenses tied to January weather when responding to analyst questions. Occupancy costs rose 11.6% year-over-year, also attributed to new openings.
Restaurant-level adjusted EBITDA decreased $1.8 million to $34.8 million, with margin down about 170 basis points to 19.1%. Adjusted EBITDA fell to $18.5 million from $21.2 million, representing 10.1% of revenue versus 12.0% in the prior year. General and administrative expenses increased to $20.4 million, which Hook said included higher equity-based compensation, professional fees, and $0.5 million of “dead site costs.”
Hook said pre-opening expenses increased to $2.6 million from $0.5 million due to “the timing and scale of activities related to our planned restaurant openings, including expansion into new markets.”
Development pipeline reviewed; CFO transition announced
Patterson announced that Hook will depart the company, noting she has served as CFO since 2020 and played a key role in supporting Portillo’s IPO in 2021 and expansion into new markets. Patterson said the company will begin a CFO search using a national executive search firm.
On development, Hook said the company opened one additional restaurant after quarter-end in Frisco, Texas, and expects three more openings during the remainder of 2026, including its first airport location at DFW International Airport and a second in-line location in downtown Chicago.
Patterson said the 2026 sites were already “locked,” but the company reviewed parts of the 2027 pipeline and decided to exit “a couple” of sites, contributing to dead site costs last quarter and potentially in the second quarter. He said the company expects 2027 openings “somewhere the four to six range.”
Marketing, value, and new-market dynamics in focus
Executives discussed value perception and how it relates to promotions, operations, and innovation. Hook said both Perks offers and the $9.99 Big Burger Bundle affected net pricing and that there can be “a lag” in how consumers internalize value perception from promotional activity. Patterson added that the company intends to focus on both price and the “numerator of the value equation,” including operational improvements and food innovation, rather than relying solely on discounting.
Patterson said Perks penetration rose by 3% in the first quarter versus the fourth quarter and described ongoing “test and learn” work to tailor messaging by customer cohorts and visit frequency. He said Perks offers tied to events and holidays—such as a buy-one-get-one hot dog offer around Major League Baseball Opening Day—have performed well, though he does not view them as an everyday approach.
On geographic performance, Patterson said Chicagoland “performed really well” in the first quarter with outsized transaction growth compared with the rest of the fleet, and said the Big Burger Bundle resonated in that market.
The company also addressed performance dynamics in newer markets. In response to questions about annualized average unit volumes for the 2025 class, Hook said volumes from newer restaurants, including the company’s first Atlanta location in Kennesaw, Georgia, reflected an opening “honeymoon” period that naturally moderates. Patterson said the decline in volumes after openings appears “a little more steep than I’m used to,” and the company plans to study consumer behavior in new markets to better understand retention and frequency, noting that customer satisfaction metrics such as Net Promoter Score remain high.
On Texas operations, Patterson said the company has seen “sequential improvement in back house labor productivity” but still sees opportunity, including benchmarking performance against similar-volume restaurants outside Texas. He said management is also focused on driving top-line performance through an integrated marketing plan.
Regarding commodities, Hook reiterated guidance for mid-single-digit commodity inflation for the year and said the company expects higher inflation in quarters two through four than what it experienced in the first quarter, with the fourth quarter expected to be the most pressured. She said Portillo’s is “hedged” or forward-bought on about 65% of beef “flats” and has locked in roughly 30% of its total basket for the second through fourth quarters.
About Portillo's NASDAQ: PTLO
Portillo’s, Inc operates a fast‐casual restaurant chain best known for its Chicago‐style menu, featuring Italian beef sandwiches, Chicago‐style hot dogs, char‐grilled burgers, salads, crinkle‐cut fries and hand‐spun milkshakes. In addition to its signature sandwiches and dogs, the company offers a selection of desserts—including its famous chocolate cake and frozen custard—as well as catering services designed to bring its Midwestern flavors to corporate and social events.
The company was founded in 1963 by Dick Portillo, who opened the first Portillo’s in Villa Park, Illinois.
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