Portillo’s (NASDAQ:PTLO) executives said the company ended fiscal 2025 balancing strong performance in its core markets with continued pressure from its Texas expansion, while pointing to early results in Atlanta as evidence the brand can succeed with a more measured development strategy.
Strategic reset emphasizes unit economics
Chairman of the Board and Principal Executive Officer Mike Miles said the fourth quarter “reflected the strengths and challenges” the company faced in 2025. He reiterated that Portillo’s has reset its development strategy, slowing new restaurant openings and prioritizing healthy unit economics and four-wall profitability. Miles acknowledged that several restaurants slated to open in 2026 reflect the prior strategy and will take time to work through.
Under the updated approach, Portillo’s plans to space new market development more widely. Miles said the next Atlanta location is not expected to open until 2027 and will be about 50 miles from Kennesaw, a strategy designed to reduce cannibalization seen in other expansions. Responding to an analyst question, he said Kennesaw has been “settling in around $200,000 a week” and is not expected to remain at an annualized pace implied by the opening period.
Miles also said the company recently hired Brett Patterson as Chief Executive Officer, describing him as a “people-first” leader with operations experience and a strong cultural fit.
Q4 results: modest revenue growth, lower comps and margins
Chief Financial Officer Michelle Hook reported fourth-quarter revenue of $185.7 million, up $1.1 million, or 0.6%, from the prior year. Growth was driven by restaurants outside the comparable base, which contributed $7.8 million of the year-over-year increase. Same-restaurant sales declined 3.3%, which Hook said reduced revenue by roughly $5.4 million in the quarter, driven entirely by a 3.3% decrease in transactions.
Average check was flat. Hook said an approximately 2.3% increase in net effective menu pricing was offset by a 2.3% decrease in product mix. Portillo’s did not take additional pricing actions in the fourth quarter, and net effective pricing was about 3.2% for the full year. Hook said the company will continue evaluating pricing in 2026 but intends to focus on transaction growth rather than price, noting that Perks-related offers could continue to pressure pricing benefits.
On costs, Hook said food, beverage, and packaging costs rose to 34.6% of revenue from 34.1%, primarily due to a 4% increase in commodity prices, partially offset by pricing. She cited higher costs in several categories, including beef and pork, and said the company is forecasting mid-single-digit commodity inflation with beef as the primary pressure point.
Labor increased to 26.0% of revenue from 24.6%, driven by lower transactions, wage increases, and deleverage from newer restaurant openings, partially offset by labor efficiencies and pricing. Hourly labor rates were up 3% in 2025, and Hook said Portillo’s estimates labor inflation of 3% to 3.5% in 2026.
Restaurant-Level Adjusted EBITDA fell $4.7 million to $40.6 million, with margin declining about 270 basis points to 21.8%. Hook said Texas expansion losses pressured consolidated restaurant-level margins by 180 basis points in the fourth quarter and 170 basis points for the full year. She said targeted labor and deployment actions helped deliver “slightly positive results” in the final period of the quarter, clarifying that the Texas restaurants collectively posted both margin expansion and profitability in that period.
Adjusted EBITDA was $24.7 million versus $25.2 million a year earlier. Hook’s outlook for 2026 calls for Adjusted EBITDA to be flat versus 2025, including an expected $9 million headwind from fully earned bonuses at restaurants and support functions.
Development reset creates “dead site” costs; 2026 openings outlined
Hook said general and administrative expense decreased $0.9 million to $19.4 million, or 10.5% of revenue, primarily due to lower variable compensation. The company incurred $1.5 million of “dead site” costs tied to its development reset during the quarter, bringing full-year dead site costs to $5.1 million. Pre-opening costs declined to $3.3 million from $4.0 million, reflecting deferred openings into 2026.
For 2026, Hook guided to G&A of $80 million to $82 million, which includes a $4.5 million bonus headwind assuming targets are met. She also guided to restaurant-level Adjusted EBITDA margin of 20.5% to 21.0%, inclusive of ongoing Texas headwinds and the additional bonus expense.
The company plans to open eight new restaurants in 2026 and expects capital expenditures of $55 million to $60 million, including investments in existing restaurants, commissaries, and corporate initiatives.
Balance sheet, cash flow, and capital priorities
Interest expense was $5.7 million, down $0.4 million year over year, driven by a lower effective interest rate of 6.7% compared with 7.5% in 2024. At quarter-end, Portillo’s had $90 million drawn on its revolving credit facility, total net debt of $334 million, approximately $56 million of available revolver capacity, and $20 million in cash.
Cash from operations decreased 26.7% year over year to $71.9 million year to date. Hook said the company expects to generate positive free cash flow in 2026 and intends to use excess cash to pay down the revolving credit facility.
Traffic drivers: Perks, marketing approach, and operational improvements
Miles said Portillo’s Perks loyalty program surpassed 2 million members and has generated strong engagement with promotions. Management said it is not planning to convert Perks into a traditional points-based “punch card” program at this time, emphasizing a “surprise and delight” approach that can include experiences, tastings, and merchandise.
In discussing marketing, management said newer markets such as Dallas and Houston require more consistent, “always-on” brand building because awareness remains low. Hook said marketing spend is expected to increase slightly in 2026, but not materially, and would be reflected in G&A guidance. She said the company is evaluating the mix of traditional, digital, social, and field marketing, noting limited scale for expensive traditional advertising in newer markets.
Operationally, Miles said hourly turnover was down under 80% for the year and general manager turnover was at historic lows. He also said Portillo’s improved drive-through speed of service by nearly 40 seconds while also improving accuracy. Hook added that off-premise channels grew in 2025, with pickup described as the fastest-growing channel and delivery also posting growth.
Looking to 2026, Hook said management is focused on strengthening transaction growth, optimizing returns on new restaurants, and using Perks and other marketing efforts to drive trial and frequency, while maintaining its commitment to positive free cash flow and long-term value creation.
About Portillo’s (NASDAQ:PTLO)
Portillo’s, Inc operates a fast‐casual restaurant chain best known for its Chicago‐style menu, featuring Italian beef sandwiches, Chicago‐style hot dogs, char‐grilled burgers, salads, crinkle‐cut fries and hand‐spun milkshakes. In addition to its signature sandwiches and dogs, the company offers a selection of desserts—including its famous chocolate cake and frozen custard—as well as catering services designed to bring its Midwestern flavors to corporate and social events.
The company was founded in 1963 by Dick Portillo, who opened the first Portillo’s in Villa Park, Illinois.
