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EP

El Pollo Loco Holdings, Inc. (LOCO)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered modest top-line growth and margin expansion: total revenue $114.284M (+1.8% YoY), GAAP diluted EPS $0.20 (+43% YoY), restaurant contribution margin 16.7% (+90 bps YoY) .
  • Mix-driven pricing strength persisted (+9.0% average check), though transactions fell (-6.8%), producing system-wide comps of +0.5%, as management leaned into value promotions to re-accelerate traffic .
  • 2025 guidance frames a year of investment and brand relaunch: openings of 10 units (1–2 company; 8–9 franchise), capex $30–$34M, G&A $48–$51M, tax rate 27.5–28.5%, and restaurant margin outlook of 17.25–17.75% (including ~25 bps tariff headwind) .
  • Stock-relevant catalysts: brand relaunch and remodel ramp (60–80 locations in 2025), value-led traffic initiatives ($5 Pollo Bowl, Taco Tuesday), and lower-cost new prototype (<$2M build; conversions ~$1M) supporting national unit growth .

What Went Well and What Went Wrong

What Went Well

  • Margin expansion despite macro/wage pressures: restaurant contribution margin rose to 16.7% (Q4 2023: 15.8%), aided by pricing and operational efficiencies .
  • Clear operational roadmap and supply chain work: management cited procurement projects and productivity initiatives (kiosks, labor deployment, holding cabinets) to offset inflation and support margins in 2025 (commodity +1.5–2.5% expected; wage inflation 5–6%) .
  • Strategic brand transformation and product innovation: CEO highlighted a robust 2025 culinary pipeline (Mango Habanero flavor, fresca wraps/salads, quesadilla) and a modernized prototype to reignite growth—“we look forward to continuing our profitable growth as we progress toward our goal of making El Pollo Loco the national fire-grilled chicken brand” .

What Went Wrong

  • Traffic declines persisted: Q4 company-operated comps were +1.6% on pricing/mix, but transactions fell 6.8%; system-wide comps only +0.5% as value-sensitive consumers pressured QSR traffic .
  • Wage inflation still elevated in California: Q4 wage inflation ~15% at company-owned units; labor as % of sales ticked up to 32.4% YoY (Q4 2023: 32.3%) .
  • Tariffs introduced a new headwind: management embedded a preliminary ~25 bps unfavorable direct impact to the 2025 restaurant margin outlook (17.25–17.75%) .

Financial Results

Core Financials vs Prior Periods and Prior Year

MetricQ4 2023Q3 2024Q4 2024
Total Revenue ($USD Millions)$112.247 $120.395 $114.284
Net Income ($USD Millions)$4.351 $6.186 $5.953
Diluted EPS ($USD)$0.14 $0.21 $0.20
Adjusted Net Income ($USD Millions)$5.224 $6.288 $5.903
Adjusted EBITDA ($USD Millions)$13.570 $15.452 $14.339
Restaurant Contribution Margin (%)15.8% 16.7% 16.7%

Segment Revenue Breakdown

Segment Revenue ($USD Millions)Q4 2023Q3 2024Q4 2024
Company-Operated Restaurant Revenue$93.960 $101.178 $95.622
Franchise Revenue$10.956 $11.330 $11.232
Franchise Advertising Fee Revenue$7.331 $7.887 $7.430

Margin and Cost Structure

Metric (% of respective denominator)Q4 2023Q3 2024Q4 2024
Food & Paper Cost (% of company-operated sales)26.9% 25.1% 25.1%
Labor & Related (% of company-operated sales)32.3% 32.4% 32.4%
Occupancy & Other (% of company-operated sales)25.2% 26.6% 25.8%
G&A (% of total revenue)9.4% 9.5% 9.7%

KPIs and Sales Drivers

KPIQ2 2024Q3 2024Q4 2024
System-wide Comparable Sales (%)+4.5% +2.7% +0.5%
Company-Operated Comparable Sales (%)+3.2% +2.8% +1.6%
Average Check Change (%)+8.8% +11.3% +9.0%
Transactions Change (%)-5.2% -7.6% -6.8%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Restaurant Contribution Margin (%)FY 2025“Approach 18%” (Q2 call) 17.25–17.75% (incl. ~25 bps tariff headwind) Lowered
New Unit OpeningsFY 2025“At least 10 restaurants” (Q3 call) 10 total; 1–2 company and 8–9 franchise Maintained; clarified mix
Capital Expenditure ($USD Millions)FY 2025N/A$30–$34 New
G&A Expense ($USD Millions)FY 2025N/A$48–$51 New
Effective Tax Rate (%)FY 2025N/A27.5–28.5 New
Wage Inflation (%)FY 2025N/A5–6 New (context for cost outlook)

Earnings Call Themes & Trends

TopicQ2 2024 (Prev)Q3 2024 (Prev)Q4 2024 (Current)Trend
AI/Tech, Kiosks, DigitalSlowed kiosk rollout to prioritize training; app value for loyalty Kiosk adoption improved; kiosks now accept gift cards/EBT; loyalty offers (e.g., 3 for $5 tacos) “Almost all” company restaurants have kiosks; continued digital/app investment Improving adoption
Supply Chain/COGSBuilding roadmap; manageable commodities (2–3%) Total-cost-to-serve project; 2–3% 2024 inflation New supply chain leader; balancing 2025 inflation (1.5–2.5%); procurement savings targeted Execution progressing
Tariffs/MacroN/A specific to tariffsValue wars intensify; consumer under pressure; CA traffic weaker Embedded ~25 bps tariff headwind in 2025 margin outlook; macro sensitivity persists Emerging headwind
Product PerformanceRelaunched burritos incl. guac; salads; testing value Value barbell: Taco Tuesday, $5 bowl; 2025 plan anchored in innovation Mango Habanero success; wraps/salads Q2–Q3 CY; quesadilla in summer; “swicy” value Strengthening pipeline
Regional TrendsBroad-based; slight outside-CA strength CA transactions weaker; TX/Houston healthier; Las Vegas pressured Q1-to-date comps +0.6% (company +2.3%; franchise -0.4%) Mixed; CA under pressure
Labor/Wages12–13% 2024 wage inflation ~14% wage inflation in Q3; productivity offsets ~15% wage inflation in Q4; 2025 expected 5–6% Easing in 2025
Development/PrototypeTarget ~$1.8M build cost Unveiled modern prototype; plan ≥10 units in 2025; conversions boost returns Under $2M in CA; conversions ~$1M; 10 units in 2025 across emerging markets On track
Brand/RemodelsCulture, hospitality focus 2-tier remodel; half the system in ~4 yrs; early positive returns 60–80 remodels planned for 2025; capex skewed to remodel ROI Accelerating

Management Commentary

  • “2024 was a foundational year… our accomplishments in 2024 are just the beginning… we look forward to continuing our profitable growth as we progress toward our goal of making El Pollo Loco the national fire-grilled chicken brand.” — CEO Liz Williams .
  • On innovation/value: “Mango Habanero… very well received… operationally simple… we will launch our new fresca wraps and salads this spring… quesadilla… priced in the $9 to $10 price range.” .
  • On margin drivers: “We expect commodity inflation to be in the 1.5% to 2.5% range for the full year 2025… labor inflation… 5% to 6%… restaurant contribution margin… 17.25% to 17.75% including… 25 basis point unfavorable direct impact from… tariffs.” — CFO Ira Fils .
  • On development economics: “This evolutionary flexible format… will be built for under $2 million… conversions… substantially below $1.8 million… around $1 million… outsized returns.” — CEO Liz Williams .

Q&A Highlights

  • Remodel ROI and cadence: Mid-single-digit upticks historically; 60–80 remodels planned systemwide in 2025; capex uplift primarily tied to 40 company remodels ($400K each) .
  • Franchise pipeline momentum: Increased meetings and franchise days; seeing renewed interest tied to comps, margins, lower build costs; details to come in future updates .
  • Margin expansion drivers: Procurement savings, less discounting, favorable mix (leg/thigh), labor deployment and equipment (holding cabinets) to drive efficiencies .
  • Prototype costs: Bold goal ~$1.8M; under $2M in CA given higher costs; conversions ~$1M provide superior returns .
  • External impacts: L.A. wildfires had limited/transitory impact; team/member safety prioritized; minimal sales disruption .

Estimates Context

  • S&P Global consensus (EPS, revenue) was unavailable at the time of query due to provider request limits; therefore, we cannot assess beat/miss versus Wall Street estimates for Q4 2024. We will update when access is restored.

Key Takeaways for Investors

  • Margin trajectory remains favorable into 2025 (17.25–17.75% guided) despite a modest tariff headwind; supply chain and productivity initiatives are the key levers .
  • Traffic recovery is the swing factor; management is leaning into value (Taco Tuesday, $5 Pollo Bowl) and innovation (Mango Habanero, wraps, quesadilla) to balance price/mix with transactions .
  • Remodel ramp (60–80 in 2025) and brand relaunch should provide incremental same-store sales tailwinds and support re-rating if execution holds .
  • Development economics improving with a lower-cost prototype (<$2M) and attractive conversions (~$1M), enabling national expansion across emerging markets (AZ, CO, ID, NM, TX, WA) .
  • Wage inflation easing (5–6% expected in 2025) and manageable commodities (1.5–2.5%) offer relief to restaurant-level margins versus 2024 .
  • Near-term trading: watch for comps acceleration as value promotions and innovation scale; monitor franchise comps (-0.4% Q1-to-date) and California regional traffic .
  • Medium-term thesis: a brand turnaround focused on operational consistency, modernized image, and disciplined unit growth—with improving ROIC—positions LOCO for profitable expansion if traffic and franchise momentum continue .