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Financing

Del Taco’s sales recover, especially at night

Same-store sales rise on a two-year basis as it recovers its “graveyard” business while breakfast remains a challenge.
Image courtesy of Del Taco

Del Taco has seen its sales largely recover from the pandemic and then some.

The Lake Forest, Calif.-based fast-food Mexican chain said its same-store sales rose 9.1% systemwide in the quarter ended March 23—or roughly 6% on a two-year basis. The result was improving profits and margins—albeit not enough to satisfy Wall Street, which sent its shares lower Friday.

But some dayparts are seeing a stronger recovery than others, with somewhat surprising improvement late at night.

 “Our graveyard business has accelerated to become one of the top dayparts on a same-store basis compared to 2019, with double-digit growth,” CEO John Cappasola told investors on Thursday, according to a transcript on the financial services site Sentieo.

The late-night business had been among the most challenged of dayparts during the pandemic, hurting certain chains that do a lot of after-hours business like Del Taco.

With bars less populated and concerts nonexistent, that business has been a challenge. The “graveyard” daypart in the Del Taco system started the year in the “negative mid-single-digit range and turned positive as the first quarter progressed,” CFO Steve Brake said.

Much of that business is coming through delivery. “Our late night and graveyard business have been really influenced by the delivery channel,” Cappasola said. He noted the company did more delivery business in the first quarter than it did in the last three months of 2020.

That “extra momentum,” Cappasola said, “is definitely translating into those later dayparts.”

Breakfast, meanwhile, remains negative compared with 2019, he said. But Del Taco is finalizing plans to launch a new breakfast platform in the summer.

Cappasola said the company anticipates morning routines normalizing as vaccination rates improve. “We expect this to put us in a position to capitalize on strong breakfast seasonality in the fall,” he said.

“I think we’ve got a great platform to deploy that represents value in mid-tier really well, and consumers are going to love it,” he added.

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