Portillo's (PTLO) 4 May 232023 Q1 Earnings call transcript

Hello and thank you for standing by. Welcome to Portillo’s First Fiscal First Quarter 2023 Conference Call and Webcast. I would now like to turn the call over to Barbara Noverini Director of Investor Relations at Portillo’s to begin.

Thank you, operator. Good morning, everyone and welcome to our fiscal first quarter 2023 earnings call.

the release announced investors.portillos.com. and through our morning read press earnings supplemental can results this we in You presentation at me Michelle today Chief call on Osanloo, With and President is Executive Chief Hook, Michael and Financial Officer. Officer; the

We any based reminder about financial business not and statements market on do business management’s with and during forward-looking constitute are future made of expectations that current begin law. update this commentary not future to Let’s statements, these results required conditions unless a call our which performance. guarantees undertake are and forward-looking by

Our and may include cause both on statements. materially annual that results discussions actual forward-looking report vary to Form our Form our factors from XX-K of risk these XX-Q

financial not measures. we measures measures non-GAAP Today’s earnings most reconciliations measures. the you for call Any the comparable be GAAP to these GAAP as of will should an We alternative direct this morning materials to non-GAAP non-GAAP financial released make the considered to to measures. reference

we deliver lines prepared open questions. the we for your will after Finally, remarks, our

Now, call Michael Chief and President over Officer. let the Osanloo, Executive to turn me

am total Thank happy quarter grew everyone. and good I you our EBITDA appreciate for with restaurant first sales by grew by Barb adjusted quarter XX% earnings performance. level call. We We our first XXXX you, joining morning very and XX.X%.

were to sequential We margins be we XX.X%, do improvement. to since year-over-year and QX both restaurants, I even also which And X level XXXX. especially as reflects margin new tend restaurant that able achieved which we this am proud of dilutive added

positioned sustain let me more in we this Michelle first positive describe but are financial momentum. will think review results quarterly later, our why to I well detail

quarter, to throughout and restaurant given in same invest some first sales XXXX. for XXXX decision comp has In X.X%. grew guests the the First, traffic tailwind us our

sustainable. prioritize guest and more metrics satisfied, flat. that traffic overall have Empowering Our experience throughput speed of our highs count pricing are importantly, accuracy And operational in we key was confidence our service, members like These give that leading But and drive transaction positive indicators guests believe guest and performance in remained to entree power. us multiyear is guest point satisfaction. higher we count sustained margins. and turn when improve on our we to are helps and team operationally This creates the satisfaction. leads our

up continues in wage Portillo’s level consumer persistently our as anticipate be price XXXX traffic, laggard team in in in combat price staying are up other even our investments environment the mind, we improved to in taking an total Keep necessary to comp, have with members. with ongoing sales, low been have course only uncertain, restaurant sentiment, up we in economy and margin our thriving. inflation strategy We higher commodity when and prices, in

on Moving the Arizona to is of ‘XX Gilbert, complete. class and is open development.

in Although if to class for Tucson term proof is already to ‘XX or the is our national moving of at Gilbert, our exceeding gives ability Indiana hard confidence Portillo’s than Arizona, Schererville, strategy early, great Colony its lines hungry And attractive visits we travels. the are Portillo’s thrilled to longer or investors. It the where are us to generate expansion in working returns feed teams hand. are enough expectations. brand of that see a Texas, aren’t that paying quickly, underwriting which the our

we for announced locations to in XXXX and the X committed already new X have of them. remain We opening restaurants

X Allen year, recently our plans We Fort and market to restaurants. Queen and Arizona restaurants brings the Arizona area announced we have Arlington Worth in Dallas, Creek, including the exciting location, up to build this which

to Rosemont, our a X announcement that and in later airport as be traditional location second and Algonquin includes is entertainment and as second O'Hare, we borders will This restaurants the room. You traffic. in This Chicago have [indiscernible] location restaurants open also well This no suburb land this Illinois, Portillo’s fantastic will drive-through that Chicago that the seen pickup likely year. benefit location of both from offer a Airport. pickup, will dining

happy the more Joliet, performance learned pickup how as past of the with ton in as operations are our And Portillo’s the of year we format that a have it first about make to over we even and efficient.

potential as to advantage are restaurant environment. and standard sized believe restaurants development this our our our infill ability but locations through the for in to have the traditional build. growth, Portillo’s lower a an We dollars revenue an is the way, margin self-fund the means primary to pickup strategy cost By continue drive

continue We finance remain are growth. to tremendous gives rates our flow expansion EBITDA and generate not flexibility dependent to markets elevated, conditions immediately. time to credit flow interest cash us our on our our the and financial restaurants achieve cash capital

turn of the and the long-term value. our three growth. at and we our in guests healthy important core returns investors members, recent as So exciting enables team value turn a constituents, it’s This our foundation They our by superior are near us laying delivering care unbeatable performance, nation. while solid our we remain to We in our offer take with team to over members an to that delivers us economic expand generates happy for our opportunities great focused that our with a for investors. grow on food guests profile both across deliver delicious

off Michelle quarter. details With the that, to a more on to let me few share hand it

Michael Great. Thank good everyone. and you, morning

our quarter our recap discuss first recent to offering. we I secondary want Before results,

an of end, purchase common stock. to quarter This completed the Class the share. exercised company’s the per stock price A million Class offering to Subsequent underwriter shares company’s of its the XXX,XXX additional of option the quarter, we shares an X $XX.XX at common of A offering

in We IPO XXXX. shares our Class All in equity of subsequently Portillo’s sold the the the shares from shares Berkshire proceeds offering to owned private firm B purchase that represented and used the in members. A primarily by pre-IPO XXXX acquired sponsored and

remaining represent April approximately As and these company. own represent beneficially of X, XX.X%. shares the Funds XX.X% transactions, Berkshire A Class of XX.X% B XXXX, After Class the shares

restaurants $XX.X $XXX.X change the to mix. driven check of prices quarter, X.X% reflecting an The increase in was results revenues in million, This check for saw increase to XXXX transactions. increase a attributable and the XX% new of increase XXXX. strong X.X% average increased X% Same-restaurant XXXX. sales in an quarter was increase during to in Revenues certain and turning primarily average in in by our a partially approximate growth. which higher in was by to same-restaurant the sales offset top X.X% menu first where an of an million and first of were attributed compared Now or the we opening increase QX, line

of delivery of in and XX.X% as first due to revenues quarter This in Cost our of was X.X% first quarter a goods an of to sold increase compared third-party the primarily commodity was revenue the XXXX. percentage in increase lower commissions. prices flat by XXXX at offset the

We will year. continue commodity overall to commodity expect ease that for currently the are and full inflation single-digit estimating inflation mid

Labor members, increase by operational to as first from incremental quarter XX.X% the of our investments of the percentage team including was revenue in efficiencies This driven our XXXX quarter first XX.X% by of partially and decrease primarily in decreased offset rate revenues a increases. XXXX. hourly in in the

good X% XX% increase of hourly feel our the about first represents prior end XXXX. quarter, care a As of versus our We are of represents rate how really a taking average versus increase year the we teams. also and

first making or transition for anticipate compensation was This due of new to wage and quarter XXXX. as insurance we XX.X% $X.X continued of and primarily and package credit of operating higher XXXX maintenance the higher repair to cashless We restaurants. expenses investments operating the supplies compelling to expenses, committed providing drive-thrus, team card and members. fees in and remain million Other in a benefits increased our expenses timing opening

X%, Occupancy by new or expenses opening restaurants XXXX. in the primarily and increased of $X.X million XXXX driven

to revenues, adjusted in Restaurant X.X% As first in occupancy EBITDA to decreased the million of of increased a $XX quarter primarily percentage increase XXXX our quarter an XXXX. expenses from revenues. million the of level $XX.X in XX.X% first due

top quarter and quarter XXXX adjusted XXXX. in Restaurant QX in initiatives. first of XXXX. year, to of this of a EBITDA the margins profile first Remember, level of fourth XXXX compared level opening margin this to our which Restaurant lower of margin improved to elevate is EBITDA efficiencies XX.X% on adjusted of implement continued efforts quarter XX.X% all to past the were compared versus our all start. experiences, improvement of first the guest strategic quarter through this the new pricing restaurants operational sequentially have deploy XXXX versus accomplished We and

fiscal XXXX. to goal May, as pricing restaurant-level use we January, increased prices beginning still the increases by power we necessary. in by believe improve These X%. pressures of and we we combat increased margins pricing, progress menu At adjusted EBITDA inflationary for cost to approximately our X%. approximately On menu continue have towards We prices can

in pricing approach environment We will the monitor moving our to strategic and forward. continue flexible current remain and

remains focus a Our guests. our value providing for great

G&A by first of to driven this increase $XX.X of $X.X in related professional an Our in Pre-opening the timing in the planned and in million quarter led an in an to $X.X XX.X%. XXXX, increase EBITDA versus adjusted from and $XX.X of first primarily first The licensing new quarter increase software the to the increased XX.X% geographic activities quarter XXXX. X.X% quarter increase XX% increased and location of was of our the expenses was XXXX the quarter This salaries XXXX in of in X.X% the of All to of XXXX. of wages expenses million openings. from increase first first first and million due restaurant million fees. quarter to in XXXX

by loan was Below from This quarter revolver of environment, offset $X.X the was partially year-over-year increase XXXX, million the the EBITDA lending and driven the facility. increase improved terms in rising of line, first by XXXX. an primarily of interest associated our first term XXXX rate the expense with quarter interest million $X.X

X, we entered million term loan million a into On announced facility. $XXX $XXX and revolver February X-year new new we that

debt. first the million of $X.X of also on we quarter During loss extinguishment recognized XXXX, a

the effective first As X.XX%. on quarter, term interest loan rate the the of the end was of

quarter Income quarter a in XXXX. of the decrease tax from first $X.X the benefit of million was first XXXX, $X.X million of

effective XX.X% for tax the first in Our versus XXXX. was rate XX.X% quarter of the quarter

the Our valuation quarter cash. increase Class loss. million increases We A in effective an increase our or allowance an tax income ended taxable in ownership, in equity quarter-over-quarter our $XX.X of with share and rate increased to which due

growth and top delivering self-funded Our and XXXX line growth operating committed remain by bottom-line our in is beyond. and flows We available cash cash. to healthy our

your for Thank turn that, it you I And time. Michael. will to with back

just Thanks, would just we’re ways, closing, after getting be Michelle. our anniversary. reaching celebrated that six growth we maturity in the XXth started. part the I’d many to In curve of mention Most but like companies decades,

value-driven experience a a point a delicious worth price at beloved create expand We our years, develop for in nation. have built much to grow Even you. enhance for to as brand our have our enduring will guests energetic delivering on Portillo’s memories an decades was XX of new that after and we and members, fans team we to menu value we Thank atmosphere the continue across for create investors. the so opportunity and

turn please line questions. let’s the that, open operator, for to With Q&A,

Thank with you. [Operator Our comes Brian Please Instructions] Morgan from Harbor ahead. question Stanley. first go

guys. morning, Good you. Thank Yes.

Brian. Good morning,

just Maybe I my last just I was rolling pricing replacing on think, notes, the on of sort off think checking side, from what you’re back year.

the you’ve like some anything progress? extent, more the on is as the through And you’d seen just philosophy rest curious, I I’m to just sales, guess, of comment that, on to April going generally So year?

about me year about April. talk head where I we were And priced But actually very purposefully. behind I hair talk just if last smack me have pricing, Michelle the we Let on pricing. a know upside will

We pricing. is price kind So decision we to on – we are X.X% totally if how going for transparent, sure We there made May. don’t we being we’re need are any we’re And haven’t in more only price. – X%. not lapping pricing not of a

really what good lot is You and go-forward pricing with But it know some we pricing where inflation. on very commodities air, But we and up a lap are. about will depends on we of the a see labor much in we October. feel basis in

ever that our taken, have tell also seen. despite good We our that the will scores are feel at we’ve pricing us of value some we scores the really that guests highest

we about value feel we’re good providing really pricing. the that the So for

is – the like in controlled to too, any of you be the it you outsized your in think expect Okay, hit? maybe impactful is in that more side, is would labor with about Or would there workforce, those of where wage on kind that just pace seems quarter particular Is the just of in industry? thank like on kind terms margins? making and investments But part pretty quarter. more increases keeping to therefore, was you. And well – labor the investments labor any

I’m that. going to let Michelle handle

could I take Brian. Yes, that one,

that year do to additional like just assess will But all we’re how period. like move So with will that also within the to increases. make I that to going we every on labor of in operate we generally as the depending do that within do every But we market, need we say rate adjust increases investments we year time QX rate appropriately. standard rates in we and We may typically may that markets continue frame. QX make

you. Thank

Thank you.

comes Our Please Blair. Zackfia Sharon question from go William next with ahead.

confer half. the then to you you’re on of the what I – hoping kind running of price you the question. current about could talk that following quarter for the And of second back Hi, kind of Does Michelle, expect in last the just second good I morning. and was X.X% want quarter? inflation cadence the commodity versus mean

Yes, take commodities Sharon, I’ll first.

over look at I we X.X% you when inflation. see we sequential there. we’ve but some quarter. in seen what know will QX last do half to of continue as improvement we well mid-single commodities inflation that course I the modeling don’t the when were were expect to we will XX.X% improvement been how that this but expect still of from We’ve this And point, digits have that improvement to at year the sequentially So at to QX the continue quarter. I this TBD see year, I about is sort at be, look year. where at that moved, see at then back of of expect

be would answer – your And were to when so will within question, put second running generally pricing. in that QX effective terms pricing, look X.X% that range. of at you we at us QX,

the we that had this Michael of place when we it it place we versus year last when in slightly comes mentioned, expecting where today. we’re of But out as pricing in As what possibly around pricing the year were did how that higher. where or put was got right in put into We lower, shakes timing we here we the see us play. terms replace but QX even that’s to off rolls that in will slightly that sit

would kind gains, said just up, wanted And touch were to the really business which distortion and different is you from of flat ago year I accounts an that of stuff that. for related know ongoing I on early were the in transaction is where entree Thanks omicron quarter? Or then entree transactions something transactions up happening we on flat. reflective in basis see the

Yes.

ahead, you Sharon, think, – I go Michael.

also transaction back more from is And informative. mix channel beginning count our I think picking stabilizes, think We our but a in is what I I will is little I it that think up. mix channel also little dine-in and described, it’s think Well, our swing – dine-in Sharon, and stabilize bit of now as you massive channel a mix to drive-thru a be had stabilize. to

would is of lab. I just year an what saying, add is And that the was outweighted to impact there of Michael because Yes. Sharon, beginning the omicron the at on

of so what that you’ve seeing part no that the that did we’re favorability quarter. front the And see than industry, within with rest different the been we of

you. Thank

ahead. comes from Please David Our Tarantino Baird. go question with next

viewing come the and what maybe the update of the And sales necessarily a for back uncertainty may that imply how benefited from part consumer. results level to point. confidence you’re think basis early not wanted I Michael, wanted and probably trends. I morning. just asking trends on But weather. this seeing just to But business general, out good quarter know I have in the at QX. traffic and quarter expected omicron at I moderated And least Hi, of given all March. the to the was the year-over-year I’m the an get for on a I the with sense that there guess, in you’re your trends the

gives confidence, honestly, Yes. are leading most indicators. me David, what the the

that, when back. delay tend suggest their our they have are they a a people of speed would to our go to go experience, visit don’t a I repeat back restaurant. service, and If they restaurant they visit have restaurant, the post So those good look guests They a it a cycle. scores, experience, value at reasons good they

And our and sustainable can so performance the they me confidence of the our throughout us that that lot of good we fact that year. rest guests experiences a see are is gives that lot are telling a the momentum of having maintaining is positive what

what So about that’s we’re gives confidence lot a doing. of what me

on secondly, indicators you’re what you’ve when have to the you are proposition to wanted far? value you just it taken what suggest perhaps side, or And and at then evaluating room still pricing looking consumer your Great. too I understand would the

a you’re Yes. We value most look We getting bundle the value we at we of about I hit. the we – are. We our likely so what feel guest bundle to Those popular do how survey, at mean be track at them ask things. what believe to popular Portillo’s. X-year – – you our number what are very competitors. every scores literally most carefully most our of different compare

so every bundle, $X, $X Portillo’s bundle between bundle feel the with, our pick we is their their one more at cases, people look an that that. what and indicative is in We popular versus bundle. $X And Like we than of great expensive and we most compete restaurant. our some about

if bit we a are is appropriately And necessary, combination price So necessary. lot we if then that can a proposition. what confidence we that priced value of that always little gives us represent a

transactions. think, idiosyncratic know lever, grow grow is comp Prices healthy via don’t I a really your try to offset your to price. things via P&L. What’s – healthy to I happen not your in we that to comp it’s all

price a last commodities over cost of when go on have the we’ve So our XX%, XX%, up XX% to going couple you’re labor when to is increased years.

little love inflation, seeing You’re you increase of historic little going bit. value level guests. of think to of sort the can that that, provide value. to And bit our you’re that the of price. above formula Portello think a moderate price that is not a of But magic I all, have then great a when we on being to is sharp We part we

Makes sense. Thank you.

you. Thank

go with Please Senatore comes question ahead. of America. next Sara from Our Bank

Thank you.

Just a then a quick question. follow-up and

sort on that’s the assume settling smaller negative, of potentially. to was mix check mix maybe more that, why the so out, channel smaller your parties, I On parties just shifting transactions,

So to or just you’re anything affected wanted of I would if the restaurant development. any that question else I do lower have clarify mix. And then seeing on a that have attach kind

else maybe If dense about could is, that Chicago more. anything comps, you reason a to about for talk that But market off-premise more first building had us the you. cannibalization sense us anything out just Thank given to development. market were land the know said how only. bit further there lessons you you just a a already from the some I of on even tell that impact give don’t anything bit

bet. You

Let good Portillo’s. question. Chicago development, look, On is me the to incredibly about handle talk mix Michelle let I’ll and development,

of restaurant comes very well, the in And when high Chicago, build doing margins. we of very out gate attractive exceptionally very, revenue, so levels a it

fill the on in and to So thoughtfully is selectively market. it Chicago us incumbent

minutes planet. home drive a think on the it People a for We XX, coverage. an XX on of there Algonquin, be one get to absolute our to So in fantastic hole pad It’s is going easier. us. we’d the to to busiest like it’s live just the area their run Portillo’s, of Walmarts This location. make need is that in who to in

it’s What but Joliet pickup and We’re isn’t location say experience. catering. pickup, the super then excited. really I it drive-through And It a dine-in isn’t. pickup remember,

– And discovered on footprint, we that doing So think can restaurant It’s tighter everything our of guide that we wanted we’ve a bit well. for I do is some kitchen smaller build that Joliet has – the a own overbuilt done that pickup. can and delivery a we We things for for it’s then and is very well. that had restaurant third-party a we But busy we have delivery some. probably truth very little there little here. the

in to want we restaurant we so better built did we that sure make into And the Joliet. than that have

in So wonderful to that I looks. think this building imagine we strategy. we’re us as is in a more location a I’ve continuing And local a achieve Sharon, Portillo’s pickup bunch of I markets and how other that And master pickup scale. infill those said can before, Chicago

you. Thank

year, So take what I is there multiple the question. into know, things When Sarah, there mix, think, talking seeing so you at a what next – we But as into of had I Channel of you’re look that is mix. come attachment, generally, per of the items seeing bit you less a plays we back it. is are mix can lower been where continuation little the transaction. about course over last half

generally So add-ons, as a what that the a less in Michael aside, bit That’s mix. bit there mentioned, we’re well. in transaction still little do or as a we’re seeing you seeing we’re in but drink whether But channel little of get count, etcetera. seeing growth that’s

you. Thank

Our next Please Geiger Dennis go question ahead. with comes UBS. from

at and kind expectations that performance in about there forward generally to many underwriting including, about, Thank this for plus I your Michelle, slight might total results think, opens, exceeded you strength time, what you. assumptions that? count going the opportunity, talk of of Michael juncture is morning, restaurant the no maybe underwriting how any cases. of I that wanted dine-in share recent given to Good adjustments thoughts Can maybe on if mean this over ask

question, and going because I an punt I’m a bit. is to it on apologize It for outstanding

especially now market, new getting we process with We total at are that going formats. through comfortable looking our the these of are addressable

think fully standard as late to expectation and and believe pickups that have Analyst we’re are one we our go restaurants going well September, our we’re what Day in going potential, through non-traditional as modest venues. including more full targeting so what an to is is Portillo’s And a market, addressable we our

things try we take other and also think what to we that. regard to airports, international like a at we’re look with can And franchise. going think do So

want whole the off what So we but process. about very don’t will a in to think, now have we that’s that speak about fulsome September. a conversation I cuff right

We exciting. to look Very forward that.

commentary think what already And on one and but year Just build how done environment on Any then. sort go for chain other through on on year. the color the of improving themselves, new some, you’ve Obviously, you touched track but. one more situation, you we side, – supply for full this your etcetera, the where it to I as as that and relates there? speak timing see that you’re permitting the this year. Any more the the targets

much Yes. than glimmer going am Look, but I of I describe think as there’s not both, it to that. a more

So, seeing freeing we seeing up chain certainly are is hair. – – supply a chain the the supply we are

that of permitting have we a that nervous this issue have so we processes. we before ever is lot about not are it. think And And for The the part budgeted of still about time in than heck quite biggest a as talked past. permitting we I more the did

have added They issues. QX, of because reasons all permitting a just are We is are all because new why we restaurants are the nine time. this of back-end loaded. it one the It’s ton QX, building year of that

add are But – on of more that I bit going I were. And Michelle, going as I am not that? they a are fast supply to So, improvement ton we it’s moderating, as – little cost is getting How up seeing but that? say not the anything am think we a you there. the free they not to chain, seeing want seeing not are flowing. to

to No, point. I to would just Dennis, add Michael’s that,

he cost correct. On build side, exactly the is

good what are any little hefty news a previously not getting We talked we bit is The not seeing seeing we increases. availability from about. are is The moderation better.

and we the shapes those there so point of feel will But within we we ‘XX see to about timing out. ability the year. our good that half built get how put back of Michael’s And the to class the out

Appreciate it. guys. Thanks

Dennis. Thanks

Jefferies. ahead. Andy Please go from comes with question next Our Barish

Hey Good you A Colony, in where average sales on kind guys. update would an share quick like morning. settling basis? The to that’s on weekly of

company. will to three It’s four of will I our it restaurants pace a I the that all crushing Andy, It’s really doing continues of can is or Colony still eye. our it. just maintaining accomplish what in on a one a to is of lot puts expectations. in give – it’s we well, confidence continues say outstanding – [ph] top us say, is about it to twinkle momentum. It plough just, be what in Texas. my It’s really,

kind out inefficiencies? that restaurant-level that of more we more and helpful. to of color year, be just as investment I back do efficiencies to Look you restaurant-level I associated the wage some it. mean for of get of we kind NRO fund maybe, of some kind think business any Just a and I to this as well. given nine way labor that for ‘XX? Yes. as bit some forward Michael, the of would then modest the mean should improvement, little the on with sort color margin that. on half mean a margins the the get seeing of improvement on of to and Michelle continue margin of of the versus inefficiencies think And I wanted

Yes.

the tackle and me second Michelle Let let first. the handle

we So, restaurants and and our smarter Andy, efficiently. you to right about are how smarter XXX% are that getting run smarter

letting salable terms some is of at is suppliers think we to prep we don’t quite be team are there actually sales, of Chicagoland let we recall then back spruces we us. in puts eye-catching. the it want doing. our restaurant. getting labor. continued more that members with outsource a is smart in do It that’s merchandising which It’s of the So, But what our efficient upside that don’t the – bit actually to for And And do, got that area it’s enjoy us we but stuff call rolled line. like kitchens we retrofit a existing beautiful, It not in – I [ph] market. And XX, a up of does prep Kitchen why am more out it. little our that the doing not some are a It into restaurant. the it’s grab-and-go moves inside of the

big got between of the and somewhere for potential a day. that’s So, reducing one us. unlock one during It’s the FTEs

so for Those because other need to don’t us. the And designed. was deal. They a big can kitchen lot how do it’s people that’s a moving of conveyance be is things

big us. for a another for to us unlock suppliers the So, take to letting prep them Kitchen and XX is do is unlock, continuing more big

margin question, And can Andy. restaurant-level Yes. tackle I the

right, So, versus to full your full looking improvement point, at modest I for year am year, the XXXX. expecting

obviously at see as the at get margin being QX comping etcetera. mentioned compares food those QX, you QX, we look last XX.X% input the you over looking can and into QX key other as costs. labor, on But You in year, costs,

And we look behave, And those to as I so pricing that’s drive right, flexible to remarks, going continue where to at at. going see in coming my I are think be as our mentioned how we margins we in approach. in

month commodities in to saw in are just You take and particularly increases us continued labor. seeing in the reaction we that additionally pricing this

versus full going point And to stick yes, am to behave. year, I unknown ‘XX. that, so expect that’s it’s for But the the quarter-over-quarter to margin we improvement definitely how just going

to the on many with I think kind of the And or of place, are was on year? you are this us XX. expected you just first to remodels, number how a you are the get to those schedule willing half the when to a were year, trying quick XX in taking share follow-up have Do

just rush it. wanted I not into – to We

took is we make we time beautiful. look a the took that to exactly to of So, bit and restaurant right out little what merchandising little the figure bit how section a – of

deploying these and the we will quarter. lifting of do suspect a that heavy So, that start beginning third lot in I

we And in it’s dynamic. XX% loaded much it a So, very between back-half is still XX% targeting – are and Chicago.

Thanks guys.

You bet.

question with next Our Guggenheim from ahead. Gregory comes Securities. Please Francfort go

Hey the questions. for guys. Thanks

in wondering am year context on been one of couple on on asked the of maybe meaningfully How if I Tucson first million the kind – store and The store I Just they had you openings [ph] thoughts the historically? in the new above Texas, new I $X think system seen one Arizona. has market you AUVs. above year, come just I within the in And performing? volumes have of was performed outside pretty this And Sunbelt guess recently a the that? I sales have might substantially guys your any this

Yes. some Look, I bragged I there not or do The in because survive could Texas. Colony certainly about were think or partly and have well whether questions we

it’s So, to Greg, of the talk rest performance ‘XX, felt outstanding. The doing Colony. important class of of The about the is I

Indiana it. whether Gilbert, it killing So, Tucson, is is Merrillville,

the we so happy ‘XX. class And extremely are of with

very comfortable to all our are on going have whole think As a it’s a it, how beat expectations, and about of run that we And right. we underwriting got we class, that’s it.

single We single it restaurant going every every crush have are year. to not

is there that that to that build, a restaurants – how to comfortable we ‘XX is, model going we and goal where to Our underwriting expectations, find of we figured gives replicable are is class lot our of as out a that. to a think confidence very to have on and why formula class Honestly, me that are I beat build, outperform. of can a doing we That kind now build. to

So, class I am excited excited. about as the really just ‘XX. I am of

I be but of restaurants going already be I certainly I ‘XX how bet class on I the I not be. betting if on to was, outstanding. that I would have are announced am that over think – to going think would now, we

Awesome. Thanks. And for Michelle. maybe then one

few to into and maybe think low-single are next range. of towards years. you. beef to And around Thank we drop Just there I in remind of stands, look as the you digit suggest commodity hear bit What can digit is the inflation one are if is a you the mid-single kind year, the And where topics hedge kind basket the you the embedded flat I end able it? that maybe you offsets? that the of us beef of of would the rest inflation guess in the the

Yes. Greg, no problem.

beef the – that. flaps XX% heavier a beef particularly being our basket in about as So, you is know, of of portion with total

flaps, that So, that the on look of close done XX% to QX we what year have with that, about we hedged hedged alone. on of XX% at we in when the with for the have remainder

as we do elevated and are budget that that – feel to we in going line this good particular, year was below we being in right, But you lock along in item, still So, our be at that have able internal that ‘XX. expected about that prices are at we versus looked all to item. beef line ‘XX

over think other make of between the proteins up basket, the at two you and XX% XX%, just chicken particular, are you what our basket. in I our seeing items offsetting of look some in somewhere that, pork other when

right deflation We proteins those on seeing year. are this

rings before, of have in some seeing onion are But buffering fries we French that’s mentioned well. increases our that and as heavier then So, increase. I as

when And still full we goods where today, the the as so ‘XX. look for overall at at at about versus year. that’s the as flaps XX% are hurting are we of But and We mentioned, we I are ‘XX look basket hedged. hedged us

strong the the that. And so portion with flaps being of

I feel sit. we where good So, about

some point, are beef We but to on we I within a in QX. still particularly to burgers, and some expect other QX items QX deflation exposed do think of little the your bit and both see like our

guys. Awesome. you, Thank

Our next with question Stifel. Chris from comes ahead. go Please O’Cull

number the was Thanks. a shorter the company of ‘XX it this few a Good fell significantly into but openings planning. a guys. to Michael, of year, the units open timeframe is I understand class higher of morning in than planning from initially

going like that such you I that and as things to – training to the support So, openings? these availability hoping that, teams could clearly resources, might was are speak to need you of

Chris. the it’s honestly, that is deadlines phrase in great that, we a question, a It’s I missed opening we slipped more it class differently. Yes, some not would bunch into of that ‘XX ‘XX. are slightly

thing always ‘XX. are have team the Portillo’s me, ‘XX leadership been an to for plans has matters to experienced plan restaurants the the most we opening the Manager that that General every And for So, to of help. to Michelle, the the is one that

to I it is what you, I believe key well, would said, these this de-risking to sure is open tell you restaurants making investment If the experienced management.

And the of restaurants for GMs targeting nine class so are. every ‘XX, one who of the we the are the of know we rest

In know are. fact, who we GMs restaurants that we the are for class the of the ‘XX, the – class targeting

that, And unlock. important to massively me, so is a

opening wonderful like – it’s our way the And restaurant new the fire team. operate be right. a restaurant opening is new would have teams the department, We analogy

full-time as got help You NRO on got NRO then people have have volunteer you out where but they necessary. team, the people can in market

open for GMs place. at we point, So, when this got honestly, we just super us have because it’s in in Arizona easy

got have place. very experienced in members We team

suspect, well. [ph], really open quick I quite clean So, seamlessly will

announced in We with Texas, GMs two their – are where we overinvested restaurants already Colony, and open both are sure the more The can them. Texas Colony they The make getting to at We are opening that we in in that’s under it. talent legs

comes gating are great I the can really, when experiences that’s members it because the comes it but get in from and enough, give not way an to like team we team, just really it the when to guests NRO open not And it position, So, management, that’s get-go… a and open good outstanding good factor. open, we in feel get and

other system? Colony – Has mix the of the the is How in maybe great. that’s of stores? and been these new been some it representative No, The mix menu

any more In Colony, of normal oddity sandwiches there an is out-of-market for we selling sell I The heck that beef actually, are of that although mean an which these a than think I of is sandwiches lot is a more we have with a general, restaurant. restaurants. at our yes, I lot

it which back by actually it the way, boy, it a lot an investors’ wonderful comfort me travel. it’s Texas. the And because minds, of traveling – think item. menu is in because of sandwich does Italian beef is – I iconic this And a just some gives now, truly in So

pretty Italian to beef an come want much you us. you If sandwich in Texas,

the mixing me back will in for people that and high. fact that and of are it the beef love confidence better food then expected. I our than again, it’s love to people lot the I some gives fact coming those sandwiches so that very travel coming concept because sandwiches beef those And a maybe

that unit Yes. to think then you called out drag a lastly, I the restaurant was how much agree, performance you new Michelle, And I believe that. during a drag. encouraging just hear do margin as quarter? that’s the on

Yes.

We that, haven’t quantified Chris.

so number. am it’s exact expectations. to, as And I our Obviously, to an not alluded give going you Michael exceeding

going with So, normally you because particularly the of to it’s sure drag opened, that a profile staffing are it to to a additional the would we just the would as first about restaurants labor you restaurants, know, look some going in be as you It’s up in as one, mentioned, that guests, are make servicing year point be have talked definitely be of Michael the But the quarter, drag totality bigger you as that. I than right, they year Chris. to at etcetera.

quantifying So, QX you that, bit on. are more are I was am little as particularly not we – openings. not spot had in new drag, of but a a It we

Great. Thanks guys.

Chris. Thanks

this There concludes are further at This today’s questions teleconference. time. no

this your at for participation. you disconnect lines may time. Thank You your