Portillo's Growth Pipeline Looks Strong: Is Demand Keeping Pace?

Portillo’s Inc. PTLO remains ambitious in its expansion strategy, planning to open 12 locations in 2025. These will include a mix of its 6,200-square-foot “restaurant of the future” prototypes, pickup-only units and the first in-line walk-up restaurant in Florida.

However, as macroeconomic pressures persist and performance in newer markets, such as Houston, underwhelms, the company faces a key question, can demand keep pace with its expanding footprint?

In first-quarter 2025, revenues rose 6.4% year over year to $176.4 million, driven by new units and a modest 1.8% increase in same-restaurant sales. However, that same-store sales gain was offset by a 3.1% decline in transactions, which was partly due to pricing and product mix adjustments. Restaurant-level EBITDA margin dipped to 20.8%, down 110 basis points from the prior year, reflecting cost pressures and lower-than-expected volume at newer stores.

Management acknowledged that units opened in late 2024, especially in newer markets like Houston, experienced soft starts due to limited brand awareness and macroeconomic headwinds. Notably, those restaurants are currently tracking well below the company’s long-term AUV targets. While not alarmed, executives stressed that building demand in unfamiliar territories is a “pick and shovel” process.

To boost visibility and traffic, Portillo’s is doubling down on localized advertising, loyalty initiatives (its Perks) and operational improvements like kiosk enhancements and breakfast testing. Early results from campaigns in Dallas and Phoenix show promise.

Still, with most new openings slated for the back half of 2025, the pressure is on to ensure demand scales with footprint. In a cautious consumer environment, strong execution and marketing will be critical to converting expansion into sustained top-line growth.

Competitors Take Varied Approaches to Balancing Growth & Demand

As Portillo’s pushes forward with national expansion, competitors like Shake Shack SHAK and CAVA Group CAVA are navigating similar dynamics with different strategies.

Shake Shack, like PTLO, has invested in new formats and digital enhancements, but its newer suburban locations have seen uneven performance amid inflationary pressure and evolving traffic patterns. The brand has leaned on licensed international growth and targeted marketing to stabilize demand, especially in newer U.S. markets.

Meanwhile, CAVA has demonstrated a more measured approach, growing unit count steadily while maintaining strong same-store sales and guest frequency. Its emphasis on Mediterranean health-forward offerings and operational discipline has helped CAVA retain demand even in a volatile macro backdrop.

PTLO’s Price Performance, Valuation & Estimates

PTLO shares have gained 12.7% in the past six months compared with the industry’s growth of 4.1%.

Price Performance

With the recent gain, PTLO is priced at a premium relative to its industry. It has a forward 12-month price-to-earnings ratio of 27.89, which is above the industry average.

P/E (F12M)

The Zacks Consensus Estimate for 2025 and 2026 earnings per share has been unchanged in the past 30 days.

The company currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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