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EP

El Pollo Loco Holdings, Inc. (LOCO)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered slight top-line beat and essentially in-line EPS: total revenue $119.177M vs S&P Global consensus $118.204M; diluted EPS $0.19 vs $0.188; restaurant contribution margin compressed to 16.0% from 16.7% in Q4 due to April 2024 CA minimum wage and higher operating costs . Values retrieved from S&P Global.*
  • Mix shifts and pricing supported gross metrics, but transactions fell; company comps +0.6% driven by +4.6% average check and -3.8% transactions; system-wide comps -0.6% YoY .
  • Guidance reframed: 2025 openings 10–11 (more franchised, fewer company-run), tax rate raised to 29.0–29.5%; capex and G&A maintained; margin guidance reaffirmed at 17.25–17.75% for FY25 .
  • Portfolio catalysts: brand relaunch (mid-May), accelerated quesadilla rollout at $9.99 combo price point targeting value-seeking and younger consumers, plus supply chain/distribution transition to PFG to enhance unit economics .

What Went Well and What Went Wrong

  • What Went Well

    • Menu innovation drove trial: “Mango Habanero delivered on taste and drove trial from new guests,” supporting pipeline momentum (Fresca wraps/salads in May; quesadillas accelerated to early summer) .
    • Cost discipline and operational initiatives: food & paper as % of company sales down 120 bps YoY to 25.2% via pricing; procurement “Project Fire” and distribution transition to PFG underpin FY margin outlook .
    • Development pipeline firming: confident in opening 10–11 units in 2025 (majority franchised, outside CA) with first new build targeted under $2M and remodel program of 60–70 system-wide locations .

  • What Went Wrong

    • Transactions softness and macro headwinds: system comps -0.6% (company +0.6% vs franchise -1.3%), with consumer pullback across income bands and particular Hispanic consumer pressure; SMG feedback flagged order accuracy/hospitality gaps .
    • Margin compression: restaurant contribution margin fell to 16.0% from 16.7% in Q4, largely a mismatch between pricing cadence and CA wage step-up; occupancy/other opex +150 bps YoY .
    • QTD trend softness: Q2-to-date through Apr 23 system comps -1.2% (company -0.1%, franchise -1.8%), with weather (three weeks of rain in March in SoCal) cited as additional headwind .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Total Revenue ($USD Millions)$120.395 $114.284 $119.177
Company-Operated Restaurant Revenue ($USD Millions)$101.178 $95.622 $98.365
Franchise Revenue ($USD Millions)$11.330 $11.232 $13.183
Franchise Advertising Fee Revenue ($USD Millions)$7.887 $7.430 $7.629
Income from Operations ($USD Millions)$10.137 $9.034 $8.972
Net Income ($USD Millions)$6.186 $5.953 $5.481
Diluted EPS ($USD)$0.21 $0.20 $0.19
Restaurant Contribution Margin (%)16.7% 16.7% 16.0%
Food & Paper Cost (% of Company Sales)25.1% 25.1% 25.2%
Labor & Related (% of Company Sales)32.4% 32.4% 32.7%
Occupancy & Other OpEx (% of Company Sales)25.8% 25.8% 26.1%

Segment breakdown and system-wide sales

MetricQ3 2024Q4 2024Q1 2025
System-Wide Sales ($USD Millions)$279.972 $262.248 $269.453
Company-Operated Restaurant Revenue ($USD Millions)$101.178 $95.622 $98.365
Sales from Franchised Restaurants ($USD Millions)$178.794 $166.626 $171.088

Key KPIs

KPIQ3 2024Q4 2024Q1 2025
System-Wide Comparable Sales YoY (%)+2.7% +0.5% -0.6%
Company-Operated Comparable Sales YoY (%)+2.8% +1.6% +0.6%
Avg Check Change YoY (%)+11.3% +9.0% +4.6%
Transactions Change YoY (%)-7.6% -6.8% -3.8%
Company-Operated Restaurants (End of Period)172 173 174
Franchised Restaurants (End of Period)324 325 325
Total Debt ($USD Millions)$76.0 $71.0 $73.0
Cash and Cash Equivalents ($USD Millions)$7.895 $2.484 $4.323

Guidance Changes

MetricPeriodPrevious Guidance (Q4 2024)Current Guidance (Q1 2025)Change
New Restaurant Openings (system)FY 20251–2 company + 8–9 franchise (9–11 total) 10–11 total incl. 9–10 franchise and up to 1 company Raised minimum total; mix more franchised
Capital Expenditures ($USD Millions)FY 2025$30–$34 $30–$34 Maintained
G&A Expense ($USD Millions)FY 2025$48–$51 $48–$51 Maintained
Effective Tax Rate (%)FY 202527.5–28.5% 29.0–29.5% Raised
Restaurant Contribution Margin (%)FY 202517.25–17.75% (call) 17.25–17.75% (call) Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024 and Q4 2024)Current Period (Q1 2025)Trend
Menu innovation & valueQ3: Burritos, salads; Taco Tuesday; need more $5 value Mango Habanero drove trial; Fresca wraps/salads in May; $9.99 quesadilla combo accelerated Accelerating innovation with value positioning
Supply chain & procurementProcurement “total cost to serve” project Distribution transition to PFG; “Project Fire” efficiencies Modernizing and cost-optimizing
Kiosks & digitalSlowed rollout for high-touch training; adoption improvements In most company stores; next step is merchandising to drive check Implementation progressing; focus on upsell
Labor/wage inflationCA $20/hr impact; 12–15% wage inflation in 2024 Q1 wage inflation ~12%; 2–2.5% expected in Q2–Q4 2025; menu pricing ~3% for year Wage pressure moderating through pricing/efficiency
Tariffs/macroValue wars, consumer under pressure Macro consumer pullback; tariff impact minimal on margin outlook Persistent headwinds; manageable tariff impact
Brand relaunchPlanned for 2025; new agency Launching mid-May Execution begins
Customer feedback & operationsStandards, deployment, equipment SMG program highlights order accuracy/hospitality gaps; “back-to-basics” Operational consistency focus
Development pipelinePrototype under $2M; conversions; plan to open 10 units in 2025 10–11 openings; next unit is 500th, outside CA; LOIs building for 2026 Momentum building outside CA

Management Commentary

  • “Our first quarter results fell short of our expectations on sales and store level profit... menu innovation can drive trial of the brand through the launch of Mango Habanero... identifying opportunities to further improve operational execution... we still have tremendous upside.” – CEO Liz Williams .
  • “We continue to expect our restaurant contribution margin to be in the 17.25% to 17.75% range... tariff impact relatively minimal as our largest commodity cost chicken is domestically sourced.” – CFO Ira Fils .
  • “We seamlessly shifted to PFG at the beginning of the year... sets us up for future growth outside of the 7 states we operate in today.” – CEO Liz Williams .
  • “Our new quesadilla combo... targeted at a combo price point of $9.99... tremendous value while delivering on quality and flavor” – CEO Liz Williams .

Q&A Highlights

  • Near-term comps: Q2-to-date system comps -1.2% through Apr 23 (company -0.1%, franchise -1.8%); expect sequential acceleration in Q3/Q4 post brand relaunch and quesadillas .
  • Pricing and wage outlook: Menu pricing ~3% for FY25 (Q2 ~3%, Q3–Q4 ~2%); wage inflation moderating to ~2–2.5% QoQ for remainder of year .
  • Operational gaps: SMG feedback pinpointed order accuracy/hospitality; management rolling “back-to-basics” training and processes to improve consistency .
  • Kiosk deployment: In most company units; focus shifting to merchandising to drive check and engagement .
  • Weather and LTO cadence: SoCal rain weighed on March; Mango Habanero’s initial trial strong but repeat softened by month 3; operational execution flagged as area to improve for repeat .

Estimates Context

MetricQ1 2024Q4 2024Q1 2025
Revenue Consensus Mean ($USD)$111,085,500*$113,187,750*$118,204,000*
Revenue Actual ($USD)$116,153,000 $114,284,000 $119,177,000
Primary EPS Consensus Mean ($USD)$0.14*$0.135*$0.188*
Diluted EPS Actual ($USD)$0.22 $0.20 $0.19
# of EPS Estimates4*4*5*
# of Revenue Estimates4*4*5*

Values retrieved from S&P Global.*

  • Q1 2025: modest revenue beat (~$0.97M), EPS essentially in-line; prior two quarters also posted revenue beats and EPS above consensus, aided by pricing/mix and cost controls .

Key Takeaways for Investors

  • Near-term setup: Comps softness persists into Q2, but management expects sequential improvement in H2 on brand relaunch and $9.99 quesadilla value; trading lens favors monitoring weekly app promo traction and H2 comp inflection .
  • Margin trajectory intact: Despite Q1 margin dip to 16.0%, FY25 restaurant-level margin guide 17.25–17.75% reiterated; watch procurement (Project Fire), distribution benefits, labor deployment to validate recapture .
  • Mix and innovation matter: Fresca wraps/salads (May) and quesadillas (summer) target portability and value—key to re-engaging younger/value consumers; track add-on rates and combo mix via kiosks to drive check .
  • Franchise-led growth: 2025 openings tilt to franchised units outside CA, reducing capital intensity; conversions provide attractive returns; pipeline momentum into 2026 is a medium-term thesis driver .
  • Macro headwinds: Consumer pullback (incl. Hispanic consumer), weather volatility, and delivery cost inflation continue to pressure transactions; operational “back-to-basics” and SMG-driven improvements are critical to traffic recovery .
  • Estimate implications: Slight revenue upside and in-line EPS suggest minimal near-term estimate changes; H2 comp acceleration and margin normalization are the key swing factors for upward revisions if execution hits timelines. Values retrieved from S&P Global.*
  • Watch governance/legal spend and tax rate: Special legal/professional fees related to activism and raised effective tax rate (29.0–29.5%) can dilute EPS leverage; monitor cadence of such items across 2025 .

Additional Context and Non-GAAP Notes

  • Adjusted EBITDA: $13.925M in Q1 2025 vs $15.699M in Q1 2024; adjustments include stock comp, special legal fees, and legal settlements .
  • Adjusted net income: $5.521M ($0.19 diluted) vs $6.805M ($0.22 diluted) in Q1 2024 .
  • Share repurchases: ~159,750 shares for ~$1.8M in Q1; program terminated March 31, 2025 .

Non-GAAP metrics reconciliations are provided in the company’s press release and 8-K exhibits .