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Fiesta’s stock surges on news of sales upswing

The company’s Taco Cabana brand is boosting revenue with off-premise alcohol, but sister chain Pollo Tropical continues to struggle.
Photograph: Shutterstock

Off-premise alcohol sales are a bright spot for Taco Cabana, which, along with sister brand Pollo Tropical, reported a recent uptick in same-store sales despite sustaining massive losses due to the coronavirus crisis.

Stock prices jumped about 25% early Friday on news that the fast casuals’ parent company Fiesta Restaurant Group can break even if current sales trends hold, as it begins to reopen its dining rooms.

Same-store sales for the week that ended Sunday improved to minus 18.6% at Taco Cabana and minus 37.8% at Pollo Tropical.

“At those sales trends, we estimate that we generate break-even profitability, which we believe should be sustainable and provide us a base from which to rebuild the bottom line as the economy reaccelerates,” Fiesta CEO Richard Stockinger told analysts Thursday.

The Dallas-based restaurant group currently has $91.6 million in cash on hand after drawing down its full revolver capacity early last month.

At Taco Cabana, same-store sales decreased 8.6% during the first 10 weeks of Q1 and fell 28.3% during the final three weeks of Q1, ended March 29. In April, Taco Cabana’s comps declined 26.2% before rising in recent weeks.

On Monday, Taco Cabana reopened 143 of its 146 shuttered dining rooms in Texas and Florida to capitalize on the Cinco de Mayo sales occasion.

The chain saw its most successful Cinco de Mayo in five years, with sales up 24% over the previous year. Off-premise alcohol sales are driving traffic at Taco Cabana, Stockinger said, with drive-thru sales up 11% from early March through the end of April. The chain is seeing success with its $2 margaritas and gallon-sized margarita packages.

“We believe the taco brand has very good momentum, and we’re seeing new customers come to the brand,” Stockinger said.

The story is a bit less rosy at chicken concept Pollo Tropical.

Same-store sales fell 7.3% during the first 10 weeks of Q1, followed by a 32% drop during the last three weeks of the quarter.

The chain’s sales have struggled because a high number of its customers in South Florida are facing economic struggles right now, he said.

“That’s why were’ pushing hard on the lower-cost, lower-priced promotions,” he told analysts. “And, one area also is, keep in mind, our menu is a lot different than quick service. Quick service is much more hand-held. … We’ve lost a lot of those people that are coming in for the platters at Pollo. We expect as the dining restrictions start to be removed or lessened, those people will come back.”

The company has made a number of operational changes to prevent the spread of COVID-19, including serving all sauces and salsas in individual containers instead of via self-service, closing self-service soda stations and stocking dining rooms with hand sanitizer. Fiesta is in the process of adding a dedicated sanitation employee; checking the temperatures of all employees; installing plexiglass shields at restaurant counters and drive-thrus; creating separate entrances and exits to aid in social distancing; and modifying dining room seating.

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