Portillo's Inc. Class A Common Stock 2026 Q2 Earnings Call

Please go ahead. Thank you, operator.

Good afternoon, everyone, and welcome to the Portillo's second quarter 2026 earnings call. With me today are Brett Patterson, President and Chief Executive Officer, and Pamela Smith, Interim Chief Financial Officer. You will find our 10-Q and earnings press release at investors.portillos.com. Any commentary made here about our future results and business conditions are forward-looking statements, which are based on management's current expectations and are not guarantees of future performance. We do not update these forward-looking statements unless required by law. Our 10-Q identifies risk factors that may cause our actual results to vary materially from these forward-looking statements. Today's earnings call will make reference to non-GAAP financial measures, which are not an alternative to GAAP measures. Reconciliations of these non-GAAP measures to their most comparable GAAP counterparts are included in this morning's posted materials.

Finally, after we deliver our prepared remarks, we will be happy to take questions from our covering sell-side analysts. With that, I will turn the call over to Brett.

Thanks, Chris. Good afternoon, everyone. Quarter two demonstrated the strength and resilience of the Portillo's brand. While we lapped significant prior year promotional and one-time activities that we chose not to repeat, underlying sales remain resilient, reinforcing the enduring appeal of our brand and the strength of our restaurant teams. Over the past several months, we have taken meaningful steps to strengthen operations, improve our business model and unit economics, and build a more sustainable platform for profitable new unit growth. This work is grounded in three strategic pillars we introduced last quarter: operational excellence, integrated marketing, and disciplined development. I'll cover the progress we've made, how we're approaching the next six months, and the key takeaways from the second quarter before Pam Smith walks through our results in more detail. Before we get into that, I'm excited to provide an update on our finance leadership transition.

As you may have seen yesterday, we announced that Kevin Kalicak will join Portillo's as Chief Financial Officer. We are thrilled to welcome such an accomplished leader to the team. His leadership will be essential as we continue strengthening our financial rigor and executing our growth strategy. I'm also want to thank Pam for stepping in to lead our finance function over the last quarter. She has been a great stabilizing force throughout this transition, and I'm grateful for her steady hand and partnership. Turning to the business, the work we completed in recent months was part of a broader strategic reset designed to strengthen our foundation, improve operating discipline, and support long-term profitable growth, all while running great restaurants. The actions we took across our cost structure, development model, and operating approach are connected by a common objective, building a more focused and scalable platform for the future.

First, we made the purposeful decision to simplify our G&A structure so we can operate with greater focus, move more nimbly, and better support our restaurant teams. After the quarter, we implemented a reduction in force that reduced our corporate headquarters with no direct impact on restaurant-level team members. While this action will create G&A savings, the primary objective was to align our team's resources and decision-making more directly with the priorities that matter most to our operators and guests. Pam will discuss the financial impact in more detail. Second, we launched an initiative to capture meaningful efficiencies across our supply chain and indirect spending categories. We expect those savings to begin contributing this year and build over time, supporting improved profitability as we scale the business. Third, we reviewed our development function end to end and identified opportunities to simplify processes, reduce costs, and improve capital discipline.

These changes will begin benefiting the class of 2027 restaurants, while our future prototype design work will support a significantly more efficient development model for 2028 and beyond. We also built a stronger and more robust real estate forecast model to improve site selection, better understand new restaurant performance, and guide future capital deployment. Early learning is already helping us understand actual performance against prior expectations for recent restaurant classes and will also sharpen future development decisions. Taken together, these actions are expected to generate annualized run rate savings of approximately $10 million-$15 million while creating a more rigorous platform for future unit growth. As we discussed last quarter, our strategy is anchored in three pillars: operational excellence, integrated and targeted marketing, and disciplined development.

Together, these pillars are designed to improve restaurant-level performance, engage guests by leveraging sharper insights, and create value through better site selection, right-sized prototypes, and lower build costs. To support these pillars, we commissioned formal studies in three areas: customer segmentation, brand perception and positioning, and menu satisfaction. Those insights, combined with feedback from our operators, are sharpening our approach to operations, targeted customer engagement, and future restaurant design. One key takeaway is clear. Portillo's has exceptional brand affinity in Chicago and beyond, along with differentiated brand positioning that we believe can travel well across existing and new markets. I'd also like to highlight a few other actions from the quarter that support this broader strategy. We strengthened our culinary function by adding Christopher Hansen as Executive Chef.

Christopher brings deep restaurant experience in culinary strategy and development. His leadership will help us advance menu innovation as well as culinary creativity, quality, and consistency. We also restructured our development team and processes and engaged a design firm to advance our next prototype. That work is guided by our brand research and focused on three priorities: lowering build costs, improving returns, and amplifying the elements that matter most to the Portillo's experience. Lastly, we opened our first airport location at Dallas Fort Worth International Airport. At under 3,100 sq ft and a kitchen 25% smaller than our former prototypes, this location incorporates equipment enhancements that will allow us to operate more efficiently within a smaller footprint.

Before I turn it over to Pam, I want to briefly touch on our second quarter results and how we are thinking about the business as we move through the back half of the year. Regarding sales performance, several items created meaningful same-restaurant sales headwinds in the quarter. Our decision to not repeat last year's buy one, get one beef promotion, the discontinuation of the prior year breakfast initiative, and cannibalization represented approximately 250 basis points of headwind. As we move through the back half of the year, we will remain focused on profitable transaction growth and avoid aggressive discounted activity as we lap significant prior year promotions, including 50% off burgers and buy one, get one free sandwiches. With that backdrop, we now expect Adjusted EBITDA of $92 million-$96 million for the year.

This updated outlook reflects deliberate choices to protect guest value by underpricing inflation, avoiding aggressive low-margin promotional activity, and reforecasting our non-comp restaurants based on recent performance and realistic expectations. In summary, over the last quarter, we aligned the organization to better support our restaurants, took meaningful actions to strengthen the business, and sharpened our focus on profitable growth. We captured savings with immediate impact, completed brand research that is shaping our future roadmap, improved capital discipline for the 2027 pipeline and beyond, and advanced prototype redesign work to support stronger cash-on-cash returns. I am confident that our sharper focus and more deliberate execution will position Portillo's for more durable, profitable growth over time. We look forward to sharing more detail on our strategy soon. Lastly, I want to thank our operators and team members who bring Portillo's energy, hospitality, and culture to life every day.

Their focus and execution are what makes this progress possible. With that, I'll turn it over to Pam to walk through our second quarter results in more detail.

Pam? Thanks, Brett. As Brett noted, second quarter sales were resilient even with the lap of breakfast, BOGO beef, and cannibalization while the team executed meaningful work to position the company for a strategic reset.