Dive Brief:
- Portillo’s is slowing its rate of store development and cutting aspects of its operations — including its Chicago breakfast pilot — to focus on its existing markets, according to a statement issued Wednesday.
- The brand slashed its unit growth target from 12 to eight new units, a 33% decrease, and lowered its same-store sales projections from 1% to 3% growth for the fiscal year to a 1% to 1.5% decline.
- The brand’s recent openings in Texas have underperformed expectations, CEO Michael Osanloo told analysts on the brand’s most recent earnings call. Osanloo, however, said the chain still sees room to grow in Texas and hasn’t given up on the market.
Dive Insight:
Some of Portillo’s underperformance in the Lone Star State, according to Osanloo, stems from a lack of brand awareness and the disparate spread of its restaurants compared to other markets — particularly its Chicago core.
“There's a reason why we are so dominant in Chicago. If you're in the Chicagoland area, in any of the suburbs, pretty much within 5 miles of you there's a Portillo's,” Osanloo said. “So if you have a craving for Portillo's, you can go.”
The development retrenchment is intended to “sharpen focus on its core markets,” according to the Wednesday press release, which aligns with Osanloo’s analysis of Portillo’s brand awareness and convenience problems.
The chain’s openings in Florida and Arizona have performed well, William Blair analyst Sharon Zackfia said in an emailed research note regarding the changed guidance. But the chain has yet to prove itself decisively.
“Portillo’s stock remains a show-me story,” Zackfia wrote. Zackfia also said the chain might face compression of unit-level margins as a result of “more normalized average unit volumes as the company expands throughout the United States.”
Despite those Portillo’s-specific dynamics, the brand attributed much of the downward revision to “pricing and promotional dynamics within the industry,” and likely trends through the remaining months of 2025.
The brand announced a set of strategic changes meant to cope with those broader pressures. Osanloo said the chain wants to reinforce value and improve service to drive traffic. The chain will simplify operations, including by ending its Chicago-area breakfast pilot, which it launched this spring and expanded in July. The brand plans to “optimize capital deployment to position Portillo’s for positive free cash flow in 2026,” and restrain new restaurant growth.
Portillo’s saw a modest same-store sales increase of 0.7% in its fiscal Q2 on top of 1.8% growth in Q1. But those performances lapped similarly sized decreases in the year-ago quarters. Activist investors have targeted the brand over its speed of service and the large footprint of many of its restaurants. That pressure resulted in the appointment of former Darden executive Gene Lee to the brand’s board earlier this year.
