PTLO - Portillo's falls after high inflation leads to unexpected quarterly loss

2023-05-04 11:44:54 ET

Portillo's ( NASDAQ: PTLO ) dropped sharply on Wednesday after missing estimates with its Q1 earnings report.

While same-restaurant sales came in at +9.1% to beat the consensus estimate of +8.9%, the restaurant operator reported an unexpected loss for the quarter.

Portillo's ( PTLO ) said it continued to experience commodity inflation, although to a lesser extent than in 2022. Commodity inflation was 8.9% for the quarter compared to 15.7% a year ago. "We expect our overall commodity inflation to ease over the course of 2023 and are currently estimating commodity inflation in the mid-single digits for the full fiscal year," noted the company.

Labor expenses as a percentage of revenue declined during the quarter primarily due to increases in the average check and transactions and operational efficiencies. The decrease was partially offset by the effect of additional wage increases, primarily from wage investments to support employees. PLTO said it expects to make additional wage investments in 2023.

In terms of pricing, PTLO increased prices 2.0% in mid-January 2023 and 3.0% at the beginning of May to continue to combat inflationary cost pressures and progress towards the chain's goal to improve restaurant-level adjusted EBITDA margins for FY23.

Shares of Portillo's ( PTLO ) fell 11.87% in late morning trading to $20.56 following the report.

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