Portillo’s Earnings: Margins Resilient Despite Sluggish Traffic in Texas
- Hardik Shah
- Aug 5
- 3 min read
TLDR
📈 Revenue Strength: Q2 revenue rose 3.6% YoY to $188.5M, driven by new restaurant openings and modest same-store sales growth.
💰 Margin Trends: Restaurant-Level Adjusted EBITDA margin held strong at 23.6%, despite labor and commodity inflation.
🔮 Forward Outlook: Full-year revenue guidance was lowered to 5–7% (from 10–12%) due to Texas ramp delays; EBITDA growth now projected at flat to low single digits.
Business Overview
Portillo’s Inc. (NASDAQ: PTLO) operates a growing chain of fast-casual restaurants specializing in Chicago-style favorites like Italian beef sandwiches, hot dogs, and char-grilled burgers. As of Q2 2025, the company operates 95 locations across 10 states, with strategic expansion underway across the Sunbelt, including Texas, Georgia, and Florida. The brand’s omnichannel format blends dine-in, drive-thru, takeout, and delivery for a differentiated consumer experience.
Portillo's Earnings Q2'25
Revenue: Q2 2025 revenue rose 3.6% YoY to $188.5 million, primarily driven by new restaurant openings. Same-restaurant sales were up 0.7%, with higher average check (+2.1%) offset by a 1.4% decline in transactions.
Profitability: Net income grew 17.7% YoY to $10.0 million, aided by lower interest expense and favorable tax adjustments.
Margins:
Operating margin: 9.3%
Restaurant-Level Adjusted EBITDA: $44.5M (−0.2% YoY)
Adjusted EBITDA: $30.1M (+0.7% YoY)
EPS: Diluted earnings per share rose to $0.12 from $0.10 a year ago.
Forward Guidance
Management Outlook
Revenue Growth (FY25): Revised down to 5–7% (prior: 10–12%)
Same-Restaurant Sales: 1–3%
Adjusted EBITDA Growth: Flat to low-single digits (prior: 5–8%)
Unit Growth: 12 new restaurants, majority in Texas and Georgia
CapEx: $97M–$100M
Risks & Opportunities
Texas openings have been slower to ramp due to local awareness challenges and permitting delays.
Management remains confident in mid-teens revenue growth potential for 2026, citing historical performance in Arizona as a proof point.
Operational Performance
Texas Ramp Challenges: Non-comp restaurants, particularly in Texas, pressured revenue. Management acknowledged slower awareness buildup and has deployed field marketers and multichannel campaigns to boost visibility.
Cost Controls: Commodity inflation was 1.9% in Q2, with beef inflation expected to rise in H2. Labor cost inflation was held at 2.9%. The company is 90% hedged on beef costs for 2025.
Build Cost Reductions: The 2025 class of restaurants is opening at $5.2–$5.5M per unit, over $1M less than 2024 builds, improving cash-on-cash returns.
Market Insights
Competitive intensity in Texas is pressuring traffic, with many chains expanding aggressively in the region.
Arizona and Florida markets are showing stronger maturity and margin profiles.
Consumer Behavior & Sentiment
Despite higher menu prices, guests are trading down—opting for smaller sizes (e.g., regular beef vs. big beef). Kiosks now drive 33% of in-store orders, helping lift items per transaction.
Portillo’s Perks loyalty program surpassed 1.9 million members, contributing to improved engagement and May traffic lifts via targeted promotions.
Strategic Initiatives
Restaurant of the Future (RoTF 1.0): Now standard, with faster builds and better guest flow. RoTF 2.0 design to launch in 2026 with even lower costs and more compact layouts.
New Formats: Upcoming in-line restaurant in Florida and first airport location at DFW in 2026 signal diversification of footprint.
AI-Driven Drive-Thru: Early positive feedback from pilot locations is fueling expansion of AI-powered order-taking systems.
Capital Allocation
Liquidity: Ended Q2 with $16.6M in cash and $75M in undrawn revolver capacity.
Net Debt: $317M; company aims to avoid net new borrowings in 2026.
CapEx: Focused on building the 2026 pipeline, with investments front-loaded in 2025.
The Bottom Line
Portillo’s is holding firm on margins and building a foundation for longer-term growth, even as short-term traffic softness in Texas slows comp momentum.
Investors should watch for:
Signs of transaction recovery in new markets like Dallas and Houston.
Execution on RoTF 2.0 rollouts and format innovations.
Cash-on-cash return metrics on the 2025 and 2026 restaurant classes.
Management remains focused on delivering top-tier unit economics and believes mid-teens revenue growth is achievable by 2026 if Texas traction improves.
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