On October 31, 2024, El Pollo Loco Holdings Inc (LOCO, Financial) released its 8-K filing for the third quarter of 2024, showcasing a mixed financial performance. The company, known for its fire-grilled chicken and fast-casual dining experience, operates and franchises numerous restaurants across the United States. Despite a challenging market environment, El Pollo Loco continues to focus on expanding its brand and improving operational efficiencies.
Financial Highlights and Challenges
El Pollo Loco reported a net income of $6.2 million, or $0.21 per diluted share, surpassing the analyst estimate of $0.17 per share. However, the company's total revenue of $120.4 million fell short of the expected $121.03 million. The decrease in company-operated restaurant revenue to $101.2 million from $102.7 million in the previous year was primarily due to the sale of 19 company-operated restaurants to franchisees.
The company faced a 7.6% decrease in transactions, although this was partially offset by an 11.3% increase in average check size due to menu price hikes. Franchise revenue saw a 10.5% increase to $11.3 million, driven by a 2.7% rise in comparable restaurant sales and new franchise openings.
Operational Achievements and Strategic Initiatives
El Pollo Loco's restaurant-level margins improved by 230 basis points to 16.7%, reflecting better operating efficiencies and higher menu prices. The company continues to focus on reducing the cost of its restaurant prototypes to stimulate future growth. CEO Liz Williams emphasized the company's progress, stating,
“Our third quarter results reflect yet another step toward capturing the opportunity ahead of us to become the national fire-grilled chicken brand.”
Income Statement and Key Metrics
Income from operations was $10.1 million, down from $13.7 million in the previous year. General and administrative expenses increased to $11.4 million, primarily due to higher labor-related costs. The company's adjusted EBITDA for the quarter was $15.5 million, up from $15.0 million in the same period last year.
| Metric | Q3 2024 | Q3 2023 |
|---|---|---|
| Net Income | $6.2 million | $9.2 million |
| EPS (Diluted) | $0.21 | $0.28 |
| Total Revenue | $120.4 million | $120.4 million |
| Adjusted EBITDA | $15.5 million | $15.0 million |
Balance Sheet and Cash Flow
As of September 25, 2024, El Pollo Loco had $7.9 million in cash and cash equivalents, with an outstanding debt balance of $76.0 million. The company repurchased 92,043 shares of its common stock for approximately $1.1 million during the quarter, leaving $3.1 million available for future repurchases under its Share Repurchase Program.
Analysis and Outlook
El Pollo Loco's performance in Q3 2024 highlights the company's ability to navigate a challenging environment through strategic pricing and operational improvements. However, the decline in transactions and increased general and administrative expenses pose challenges that need addressing. The company's focus on expanding its franchise network and improving restaurant-level margins positions it well for future growth, although market conditions and consumer preferences will continue to play a critical role in its success.
Overall, El Pollo Loco's strategic initiatives and financial discipline are crucial for sustaining growth and enhancing shareholder value in the competitive restaurant industry.
Explore the complete 8-K earnings release (here) from El Pollo Loco Holdings Inc for further details.
