Strong Traffic Trends at El Pollo Loco: A Signal for More Upside?

El Pollo Loco Holdings, Inc. (LOCO) delivered encouraging signs in second-quarter 2025 as traffic trends turned positive, indicating its strategic initiatives may be gaining traction. Revenues were $125.8 million, up 3% year over year, while adjusted earnings per share of 28 cents exceeded estimates. Notably, system-wide traffic rose 0.8%, reflecting sequential improvement after a sluggish start to the year.

The turnaround is being fueled by a balanced mix of innovation and value. New menu items like Fresca Salads and premium quesadillas resonated with guests, boosting frequency among existing customers and drawing new ones. Targeted discounting, through Taco Tuesday, app-only promotions and delivery offers, helped drive visits without eroding core pricing power. Management emphasized that these measures reflect a disciplined approach to value rather than broad-based discounting, protecting margins in the process.

Operational execution also contributed to profitability. Restaurant-level operating margins improved to 19.1% from 18.6% a year ago, aided by efficiency gains in labor deployment and modest commodity relief. Franchise traffic growth of 1.5% further underscored the brand’s resilience, even as average checks softened slightly.

Looking forward, momentum may hinge on sustaining traffic growth amid a challenging macro backdrop. July trends were choppy, but management remains optimistic, citing the brand relaunch, new product pipeline and remodeling efforts as catalysts. With shares already up sharply in recent months, the question for investors is whether these traffic gains can translate into durable comp growth and sustained earnings upside.

Competitor Landscape: WING and CMG

While El Pollo Loco is benefiting from stronger traffic trends, it operates in a competitive quick-service and fast-casual chicken segment where peers are also showing resilience. Wingstop Inc. (WING) has been a standout performer, with robust same-store sales growth driven by digital engagement and international expansion. Its focus on delivery and off-premise channels has kept traffic consistently strong, setting a high bar for value-driven operators like LOCO.

Chipotle Mexican Grill, Inc. (CMG) offers another relevant comparison. It continues to leverage menu innovation and loyalty-driven promotions to boost frequency. Chipotle’s premium positioning and scale give it greater pricing flexibility.

For LOCO, the challenge is to sustain its traffic momentum without sacrificing value in an inflation-sensitive environment. Competing against Wingstop’s digital dominance and Chipotle’s strong brand equity, LOCO’s ability to balance innovation, affordability and authentic positioning will be critical in maintaining upside potential.

LOCO’s Price Performance, Valuation and Estimates

LOCO’s shares have lost 2.8% in the past six months compared with the industry’s decrease of 8.9%.

Price Performance

LOCO is priced at a discount relative to its industry. It has a forward 12-month price-to-earnings ratio of 10.9, which is well below the industry average.

P/E (F12M)

The Zacks Consensus Estimate for 2025 and 2026 earnings per share has increased in the past 60 days.

LOCO’s Zacks Rank

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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