El Pollo Loco shares surged more than 17% on Friday after the company said that its sales increased in the third quarter and have continued rising into the fourth.
The Costa Mesa, Calif.-based chicken chain said that its same-store sales rose 2.6% in the quarter ended Sept. 26.
The company said that transactions in the quarter were flat but rose in September. And executives said on Thursday that both sales and transactions have continued their upward momentum through October.
“We’re encouraged by the positive transaction trends … relative to the rest of the industry, where that seems to be more elusive for many brands,” Bernard Acoca, El Pollo Loco’s CEO, said on the company’s third quarter earnings call.
The company has delivery through DoorDash in all of its restaurants. Delivery represents just 2.6% of the company’s total sales so far, but executives are bullish on the service heading into 2019.,
“I think we’ve been happy with the steady progress we’ve made on delivery in 2018,” Acoca said. “But we’re going to be more ambitious about the growth we’re expecting from delivery in 2019.”
Acoca said the company is working to determine its delivery fees. But it also hopes to translate purchase data from the service into more personalized marketing to consumers.
The company has mobile order and pay. And its loyalty program now has 1.1 million members and accounts for 7.5% of the chain’s sales. And Acoca believes that program could also be a catalyst to delivery growth in the coming years.
El Pollo Loco, which operates nearly 500 restaurants, is testing menu simplification in Houston, Dallas and Los Angeles to remove complex, low-selling items. Acoca said the company removed 12 to 15 SKUs off the menu. He said the company is “pleased” with the initial results of the test, which began in September.
“We’re not seeing any negativity associated with the test at this juncture,” he said, but noted that such a test requires a longer timeframe to determine its overall impact on the company and its sales.
Loco is also remodeling restaurants under a new “Vision” plan. The company expects to have completed 15 such remodeled by the end of the year, with franchisees completing 25 to 30.
Executives on the earnings call said they are focusing on developing stores in core markets, notably Southern California and Las Vegas. “We’re focusing on those because we know when we build restaurants in those markets, we get very good returns,” CFO Larry Roberts said on the call.
El Pollo Loco’s revenue rose 5.5% in the quarter to $106.7 million from $101.2 million. Net income was $7.6 million, or 19 cents per share, up from $6 million or 15 cents in the same period a year earlier.
The company’s stock price hit a new 52-week high on Friday. El Pollo Loco’s stock is up 38% on the year, to around $15 a share. It has not been at this level in more than three years.
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