Portillo's Q3 Earnings Call Highlights

Key Points

• Third-quarter results topped expectations: Revenue rose 7% to $194.1 million, same-restaurant sales increased 1.4%, and adjusted EBITDA climbed 23.7% to $26.5 million. Transactions were still down 0.7%, though the trend improved from the prior quarter.
• Portillo’s raised its 2026 adjusted EBITDA outlook to $98 million–$101 million and said early fourth-quarter same-restaurant sales were running ahead of Q3. It plans to close a mid- to high-single-digit number of underperforming restaurants, with most closures expected in Q4 and material charges anticipated.
• The company is tightening site selection and developing a restaurant prototype more than 40% smaller than its prior average, while targeting new-store cash-on-cash returns above 20%. It also expects $10 million–$15 million in annualized efficiencies.

Portillo's NASDAQ: PTLO reported higher third-quarter sales and earnings, raised its full-year adjusted EBITDA outlook and outlined plans to close a mid- to high single-digit number of underperforming restaurants outside Chicagoland.

The restaurant chain’s revenue rose 7% from a year earlier to $194.1 million, while same-restaurant sales increased 1.4%. Adjusted EBITDA grew 23.7% to $26.5 million. President and CEO Brett Patterson said results exceeded expectations but cautioned that “one quarter is not a trend.”

The company expects most of the planned closures to occur in the fiscal fourth quarter. Chief Financial Officer Kevin Kalicak said Portillo's could not yet disclose the locations, timing or costs because it was still evaluating lease options. The closures are expected to result in material cash and noncash charges, mostly in the fourth quarter.

Sales improve, though transactions remain lower

Third-quarter same-restaurant sales reflected a 2.1% increase in average check and a 0.7% decline in transactions. Menu prices rose 2.1%, while the transaction trend improved by 270 basis points from the second quarter, Kalicak said.

Kalicak said the company faced more than 200 basis points of traffic headwinds from a breakfast test and heavy promotional discounting in the prior-year period, as well as sales cannibalization from new restaurants. Limited-time offers, including the Char'diniera Dog and Dr Pepper Shake, helped support transactions without deep discounting, he said.

Restaurant-level adjusted EBITDA rose to $40.1 million, with the margin expanding 50 basis points to 20.7%. Labor expense improved by 60 basis points to 26% of revenue, helped by hourly labor efficiencies and higher average checks. Food, beverage and packaging costs fell 10 basis points to 34.4% of revenue despite commodity inflation of 2.2%, driven by elevated beef costs.

Kalicak said labor model changes, particularly at lower-volume restaurants, were a major contributor to the margin improvement. He added that the company’s cost-saving initiatives had not yet appeared in the food cost line and were instead showing up in general and administrative expenses.

Higher outlook and early fourth-quarter trends

Portillo's raised its 2026 adjusted EBITDA outlook to $98 million to $101 million. It expects revenue of $768 million to $773 million and a restaurant-level adjusted EBITDA margin of 20% to 20.5%. The outlook incorporates the expected fourth-quarter closures.

Kalicak said fourth-quarter same-restaurant sales were running ahead of the third-quarter pace at the time of the call, partly because of strong Oreo dessert sales. He cautioned that the company continued to face comparisons with deeply discounted offers from the prior year, including a free beef sandwich promotion.

The company plans to open one more restaurant in 2026, on North Michigan Avenue in downtown Chicago, bringing its total openings for the year to eight. It expects to open four to six new restaurants in 2027.

Smaller restaurants and stricter site selection

Patterson said Portillo's is applying stricter standards for new sites and has exited several future real estate agreements that did not offer sufficient return potential. The company expects new restaurants to generate cash-on-cash returns above 20%, Kalicak said.

The chain is also developing a 2028 prototype of approximately 4,600 square feet, more than 40% smaller than its previous average restaurant. It would require about 1.5 acres, compared with three acres historically. Patterson declined to provide a targeted average unit volume for the design, saying site selection would determine sales potential.

Discussing underperforming locations outside Chicagoland, Patterson cited site selection, cannibalization from rapid infill development and limited brand awareness. He said some restaurants displayed the Portillo's name without identifying what they served, making it harder for unfamiliar customers to understand the offering.

The company remains on track to deliver $10 million to $15 million in annualized run-rate efficiencies, Patterson said, with more detail expected when it provides 2027 guidance in January. Portillo's also plans to invest in technology and maintenance for existing restaurants, fund qualified new locations and use excess cash to reduce debt.

Kalicak said the company expects annual same-restaurant sales growth of 2% to 3% and, within the next three years, new restaurant growth at a high-single-digit percentage rate. At the end of the third quarter, Portillo's had $24.8 million in cash and $300 million in net debt.

About Portillo's (NASDAQ:PTLO)

Portillo's, Inc operates a chain of fast-casual restaurants known for Chicago-style food. Its menu features Italian beef and Italian sausage sandwiches, Chicago-style hot dogs, hamburgers, chicken sandwiches, salads, french fries, shakes and other desserts.

The company traces its origins to 1963, when Dick Portillo opened a small hot dog stand called The Dog House in Villa Park, Illinois. Portillo's has since expanded from its Chicago-area roots into a multi-state restaurant business, with locations primarily in the United States.

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