Fast food chain El Pollo Loco (NASDAQ:LOCO) fell short of the markets revenue expectations in Q3 CY2025, with sales flat year on year at $121.5 million. Its non-GAAP profit of $0.27 per share was 26.2% above analysts’ consensus estimates.
Is now the time to buy LOCO? Find out in our full research report (it’s free for active Edge members).
El Pollo Loco (LOCO) Q3 CY2025 Highlights:
- Revenue: $121.5 million vs analyst estimates of $124 million (flat year on year, 2% miss)
- Adjusted EPS: $0.27 vs analyst estimates of $0.21 (26.2% beat)
- Adjusted EBITDA: $17.42 million vs analyst estimates of $15.56 million (14.3% margin, 12% beat)
- Operating Margin: 9.4%, up from 8.4% in the same quarter last year
- Locations: 498 at quarter end, up from 496 in the same quarter last year
- Same-Store Sales were flat year on year (2.7% in the same quarter last year)
- Market Capitalization: $271.8 million
StockStory’s Take
El Pollo Loco’s third quarter was marked by a positive market response, despite revenue coming in below Wall Street expectations. Management pointed to effective menu innovation—such as the successful introduction of new quesadilla and burrito bowl offerings—and increased digital engagement as key factors supporting traffic growth and margin expansion. CEO Elizabeth Williams highlighted the company’s focus on balancing value and quality, with targeted promotions and operational improvements driving profitability even in a challenging consumer environment.
Looking ahead, El Pollo Loco’s management is prioritizing a robust product pipeline, including new salads, portable chicken formats, and expanded beverage offerings to capture additional sales occasions. The company is also focusing on accelerating unit growth outside California and modernizing existing locations. CEO Elizabeth Williams emphasized that “operational excellence and innovative menu development will continue to guide our growth,” while CFO Ira Fils noted ongoing initiatives to enhance labor efficiency and control input costs.
Key Insights from Management’s Remarks
Management attributed the flat revenue to ongoing consumer caution but cited menu innovation, operational gains, and digital investments as drivers of improved margins and positive traffic trends.
- Menu innovation drives engagement: New premium quesadillas and burrito bowls were highlighted as successful offerings, with sustained demand even after promotional campaigns ended, validating the company’s approach to value and quality.
- Digital sales momentum: Digital channels, including the app, web, and kiosks, accounted for 27% of system sales, up from 20% the prior year. Loyalty transactions saw a 28% increase, indicating higher customer engagement and frequency.
- Operational efficiency gains: Enhanced labor deployment, deployment of kitchen technology, and supply chain optimizations led to improved restaurant-level margins, despite modest transaction growth and a decline in average check size.
- Geographic expansion underway: With new locations in Colorado Springs and El Paso, three-quarters of new openings are now outside California. Recent new stores are outperforming system averages, and second-generation sites contribute to lower investment costs.
- Brand transformation and remodel program: The “Let’s Get Loco” campaign and ongoing restaurant remodels are resonating with customers, resulting in a mid-single-digit sales lift at updated sites and building brand equity in new and legacy markets.
Drivers of Future Performance
Management expects continued growth to be led by new menu launches, operational improvements, and expansion into new markets, with a focus on sustaining margin gains.
- Product pipeline expansion: The introduction of new salads, Loco Tenders, and a fire-fried chicken sandwich aims to capture evolving consumer preferences for portable, value-driven meals. Management believes these innovations will help broaden the brand’s appeal and drive incremental transactions.
- Unit growth and market entry: The company plans to double its development pace in the coming year, with a strong pipeline of openings—particularly outside of California. Management views success in new markets as key to unlocking higher system-wide sales growth.
- Margin improvement initiatives: Continued investment in labor-saving technologies, supply chain efficiencies, and menu engineering are expected to support margins. CFO Ira Fils stated there remains “a lot of opportunity” to further optimize costs and reach the long-term margin target of 18–20%.
Catalysts in Upcoming Quarters
In the coming quarters, our StockStory team will be monitoring (1) the adoption and performance of new menu items, (2) the pace and success of unit openings outside California, and (3) the impact of ongoing restaurant remodels on sales and customer engagement. Additionally, we will track progress on operational cost initiatives and the effectiveness of digital channel investments.
El Pollo Loco currently trades at $9.66, up from $9.06 just before the earnings. Is the company at an inflection point that warrants a buy or sell? See for yourself in our full research report (it’s free for active Edge members).
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