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Portillo’s wants to be a ‘price laggard’

The fast-casual Italian beef chain, which went public in October, said it looks to take traffic while other brands are taking price. But that doesn’t mean it’s not raising prices at all.
Portillo's
Photo courtesy Portillo's

While other chains are raising prices to keep up with inflation on all fronts, Portillo’s on Thursday said it intends to be a “price laggard.”

The fast-casual Italian beef chain, which went public late last year, said it wants to be a consistent choice for value-minded diners.

“We intentionally price below inflation and we haven’t priced as aggressively as many other restaurant brands,” CEO Michael Osanloo told investors Thursday. “And that’s because we believe in offering strong value to our guests.”

Osanloo said he wants Portillo’s to be a “respite” from the rising prices consumers see all around them. The chain’s average check is under $10.

“A comforting place where people don’t have to think about that,” he said. “We want them to come, have a beef sandwich and a great experience, and leave those stresses at the door.”

Portillo’s, which went public in October, raised prices 4.4% in 2021. Food-away-from-home prices have increased 6.8%, the highest rate since 1981, over the past year.

But the company’s stance doesn’t mean Portillo’s isn’t taking any price at all:  The chain upped prices 3% during the fourth quarter and plans to raise them about 1.5% during the first quarter.

“Our belief is, well, others might be shrinking portions, taking prices above inflation,” Osanloo said. “Our philosophy is we’re going to take traffic … Our goal is to make sure that we’re working hard to grow margin dollars, and we’re just not quite as torked up about the percentages.”

For the quarter ended Dec. 26, Portillo’s total revenue increased 17.2%, to $138.9 million.

Portillo’s opened two locations during the fourth quarter, bringing its unit count to 69 as of Dec. 26. For 2022, Portillo’s said it plans on seven new restaurant openings.

The chain’s same-store sales climbed 10.3%. Portillo’s estimates same-store sales for the first quarter will be 7.5% to 8.5%.

The chain is working to boost efficiency in its restaurants, as an alternative to further price hikes.

But there are pressures from all sides.

Portillo’s is anticipating 13% to 15% commodity inflation for 2022, due to its reliance on beef and chicken. And labor as a percentage of revenues increased to 26.2% during the fourth quarter, up from 24.3% during the same period a year before.

“We didn’t anticipate a war in Ukraine,” Osanloo said. “We didn’t anticipate fuel costs where they are. And so we’re just being as transparent and honest as possible. What will happen in three to six months? I don’t know.”

 

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