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EP

El Pollo Loco Holdings, Inc. (LOCO)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 delivered modest top-line growth and meaningful margin expansion: revenue rose to $125.8M (+2.9% YoY), restaurant contribution margin improved 50 bps to 19.1%, and adjusted EPS increased to $0.28 .
  • Results beat S&P Global consensus on revenue and adjusted EPS: revenue $125.8M vs $124.2M*, adjusted EPS $0.28 vs $0.24*; management maintained full-year restaurant-level margin guidance of 17.25%-17.75% .
  • Traffic turned positive system-wide and digital mix stepped up to 25.5%, aided by targeted value offers, brand relaunch, and new products (Fresca Wraps/Salads; Quesadillas) .
  • Near-term tone: mixed; Q3-to-date system comps down 0.7% through July 23, but management expects modest improvement into Q4 on new product momentum, measured pricing (Q3 ~2.5%, Q4 ~2.7%), and easier compares .

What Went Well and What Went Wrong

What Went Well

  • Positive traffic and margin expansion: “We…achieved a return to positive system-wide traffic growth” and lifted restaurant-level margins to 19.1% (+50 bps YoY) despite value investments .
  • Product and brand execution: Fresca Wraps/Salads mixed 4%-5% and Quesadillas launched at 4%-5% mix with early growth; brand relaunch under “Let’s Get Loco” resonated, supporting sequential comp improvement late in Q2 .
  • Digital acceleration and operational progress: digital sales (incl. kiosks) reached 25.5% vs 17.1% LY; improved labor deployment and equipment aided labor efficiencies and margin expansion .

What Went Wrong

  • Comps still slightly negative and franchise softness: system comps -0.3% and franchise comps -1.1% amid value-sensitive consumers and greater franchise discounting/check pressure .
  • Cost pressures in occupancy/other: occupancy and other operating expenses rose 150 bps YoY to 25.6% (delivery, utilities, rent, repairs), partially offsetting COGS and labor improvements .
  • Choppy near-term trends: Q3-to-date system comps -0.7% with July “choppier”; macro headwinds and value intensity remain near-term risks to sales leverage .

Financial Results

Quarterly trend (oldest → newest)

MetricQ4 2024Q1 2025Q2 2025
Total Revenue ($M)$114.3 $119.2 $125.8
GAAP Diluted EPS ($)$0.20 $0.19 $0.24
Adjusted EPS ($)$0.20 $0.19 $0.28
Income from Operations ($M)$9.03 $8.97 $11.31
Restaurant Contribution Margin (%)16.7% 16.0% 19.1%
Food & Paper (% of company sales)25.1% 25.2% 24.5%
Labor (% of company sales)32.4% 32.7% 30.8%
Occupancy & Other (% of company sales)25.8% 26.1% 25.6%
G&A (% of total revenue)9.7% 9.5% 10.8%

Q2 2025 actuals vs S&P Global consensus

MetricConsensus*ActualSurprise
Revenue ($M)$124.24*$125.83 +$1.59
Primary EPS ($)$0.24*$0.28 +$0.04

*Values retrieved from S&P Global.

Segment revenue breakdown (Q2)

SegmentQ2 2024 ($M)Q2 2025 ($M)
Company-Operated Restaurant Revenue$102.31 $104.32
Franchise Revenue$11.65 $13.37
Franchise Advertising Fee Revenue$8.22 $8.14
Total Revenue$122.18 $125.83

KPIs and operating metrics

KPIQ1 2025Q2 2025
System-Wide Comparable Sales (%)—-0.3%
Company-Operated Comp Sales (%)+0.6% +1.2%
Franchise Comp Sales (%)-1.3% -1.1%
System-Wide Traffic Growth (%)—+0.8%
Digital Mix (% of Sales)—25.5%
Restaurant Contribution ($M)$15.77 $19.93
Restaurant Contribution Margin (%)16.0% 19.1%
Food & Paper (% of company sales)25.2% 24.5%
Company Restaurants (end of period)174 174
Franchised Restaurants (end of period)325 325
Remodels Completed YTD (through period)8 (through April) 20 (through June)
Debt ($M) / Cash ($M)$73 / $4.3 (3/26) $69 / $9.0 (6/25)

Guidance Changes

MetricPeriodPrevious Guidance (Q1)Current Guidance (Q2)Change
System-wide OpeningsFY202510–11 (9–10 franchise, up to 1 company) 10–11 (9–10 franchise, up to 1 company) Maintained
Capital SpendingFY2025$30–$34M $31–$34M Raised low end
G&A ExpenseFY2025$48–$51M $48–$51M, excluding one-time costs Clarified ex-one-time
Effective Tax RateFY202529.0–29.5% 29.0–29.5% Maintained
Restaurant Contribution MarginFY202517.25%–17.75% (call) 17.25%–17.75% (call) Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’24, Q1’25)Current Period (Q2’25)Trend
Menu innovationQ1: Mango Habanero drove trial; pipeline includes Fresca & Quesadillas . Q4: Brand pipeline cited .Fresca mixed 4–5%; Quesadillas launched at 4–5% and growing .Improving
Brand relaunch/marketingQ1: Relaunch planned mid-May .“Let’s Get Loco” launched; sequential sales improved; more media in fall .Building
Digital/kiosksQ1: Kiosk rollout ongoing; next phase merchandising .Digital reached 25.5% of sales; higher loyalty frequency .Improving
Traffic/comps outlookQ1: Expected sequential improvement in 2H .System traffic positive; Q3-to-date comps -0.7%, but expecting modest improvement into Q4 .Mixed/gradual
Pricing strategyQ1: ~3% for FY, Q2 ~3%, Q3–Q4 ~2% .Q3 pricing ~2.5%, Q4 ~2.7%, targeted combos .Thoughtful/tactical
Labor & wageQ1: Wage inflation 4–5% FY; labor mix strategies .Labor % down 130 bps YoY (efficiencies); wage inflation 3–4% FY .Improving
Commodities & tariffsQ1: 1–2% inflation FY; limited tariff exposure .FY commodity inflation 0.5–1.5%; tariffs minimal given domestic chicken .Slightly better
Unit development/remodelQ1: ≥10 opens in 2025; accelerate 2026; remodels 60–70 targeted .≥10 in 2025; potential to nearly double 2026; 20 remodels done by Q2; mid-single-digit uplift at 7 remodeled company stores .Accelerating
Operations/serviceQ1: Back-to-basics, SMG customer feedback .Continued service focus; consistency improving though daypart opportunities remain .Improving but ongoing

Management Commentary

  • “We…achieved a return to positive system-wide traffic growth. Additionally, we had profitability growth across both the restaurant and corporate-level.” — CEO Liz Williams .
  • “Our digital business…grew to 25.5% of sales compared to 17.1% in the second quarter of last year.” — CEO Liz Williams .
  • “We should see Q3 about 2.5% pricing, and…Q4…about 2.7%…targeted type of price increases” — CFO Ira Fils .
  • “For the full year 2025, we continue to expect our restaurant contribution margin to be in the 17.25%–17.75% range.” — CFO Ira Fils .
  • “We have the opportunity to almost double [unit growth] in 2026…many of those sites either have leases signed or…under development.” — CEO Liz Williams .

Q&A Highlights

  • Macro/value dynamics: Consumers are value-sensitive with month-end softness; targeted value via app, delivery promotions, and coupons balanced against not discounting everyday menu .
  • Franchise mix: Franchise traffic +1.5% but check down from more discounting and lapping higher 2024 pricing; experimenting with family meal promotions .
  • Pricing cadence: Q3 pricing moved earlier (~2.5%); Q4 ~2.7%; focused on combos to balance discounting and check .
  • Sales cadence and products: Sequential improvement from April to June; Quesadillas mixing 4–5% and expected to build with more media; Fresca 4–5% mix at launch .
  • Remodel ROI: New “iconic” remodels show mid-single-digit sales uplift at seven company locations, in line with expectations .

Estimates Context

  • Q2 beat vs S&P Global: revenue $125.8M vs $124.2M*, adjusted/“Primary” EPS $0.28 vs $0.24*; management kept full-year restaurant margin guidance, suggesting EPS estimate revisions could tilt modestly higher, tempered by choppy Q3-to-date comps (-0.7%) .
  • Q1 was close to in-line: revenue $119.2M vs $118.2M*, EPS $0.19 vs $0.188* .
  • Forward set-up: Q3 consensus revenue $123.4M* and EPS $0.214* sit against mixed intra-quarter trends and planned pricing/media, implying limited but possible upside if product momentum and fall media drive traffic as management expects .

*Values retrieved from S&P Global.

Key Takeaways for Investors

  • Execution improving: Restaurant contribution margin expanded to 19.1% despite targeted value; labor efficiencies and modest commodity deflation supported margins .
  • Demand drivers in place: Positive system traffic, digital penetration of 25.5%, and new products (Fresca, Quesadillas) are resonating and should benefit 2H visibility, especially with stronger fall media .
  • Near-term comps are choppy: Q3-to-date comps -0.7%, but management expects modest improvement into Q4 as pricing, innovation, and easier compares kick in—monitor weekly trends and promo elasticity .
  • Unit growth re-accelerating: ≥10 opens in 2025 and a larger 2026 pipeline (leases signed/under development), plus mid-single-digit remodel lifts, support medium-term AUV and footprint growth .
  • Balance sheet/liquidity stable: Debt reduced to $69M with $9M cash at quarter-end; additional $1M paid down post-quarter, providing flexibility for remodels and development .
  • Estimate path: Q2 revenue/EPS beats likely nudge FY EPS modestly higher, but occupancy and delivery costs plus macro value sensitivity cap upside until traffic accelerates sustainably .
  • Watch items: Franchise discounting/check pressure, occupancy/utilities, and macro-driven volatility; upside from brand relaunch awareness, Quesadillas media ramp, and operational consistency .

Appendix: Additional Context

  • Product launches during Q2: Fresca Wraps/Salads (portable, quality-forward) launched mid-May; Quesadillas launched June 26 with $9.99 combo and guacamole included .
  • Q3 cadence commentary: July impacted by holiday timing; management anticipates gradual improvement through 3Q/4Q on innovation and pricing .
  • Non-GAAP adjustments in Q2: Add-backs included $0.78M special legal/professional fees (activism-related) and $0.71M restructuring/executive transition costs among others; adjusted EBITDA $18.47M vs $17.22M LY .