Fast food chain El Pollo Loco (NASDAQ:LOCO) reported Q4 FY2023 results beating Wall Street analysts' expectations, with revenue down 3.2% year on year to $112.2 million. It made a non-GAAP profit of $0.16 per share, down from its profit of $0.16 per share in the same quarter last year.

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Maria Hollandsworth, President and Chief Operating Officer of El Pollo Loco Holdings, Inc., stated, “We are pleased with the progress our team has made during the fourth quarter as they execute against our initiatives geared toward top-line growth and profitability improvements. As we look into 2024, we aim to lean into what makes El Pollo Loco unique – our one-of-a-kind, better-for-you marinated flame grilled chicken that delivers a truly special flavor that our customers crave. Through menu innovations, marketing initiatives and renewed focus on four-wall operational excellence, we will build upon the foundation we have laid down last year to unlock the immense potential we have ahead of us.”

With a name that translates into ‘The Crazy Chicken’, El Pollo Loco (NASDAQ:LOCO) is a fast food chain known for its citrus-marinated, fire-grilled chicken recipe that hails from the coastal town of Sinaloa, Mexico.

Traditional Fast Food

Traditional fast-food restaurants are renowned for their speed and convenience, boasting menus filled with familiar and budget-friendly items. Their reputations for on-the-go consumption make them favored destinations for individuals and families needing a quick meal. This class of restaurants, however, is fighting the perception that their meals are unhealthy and made with inferior ingredients, a battle that's especially relevant today given the consumers increasing focus on health and wellness.

Sales Growth

El Pollo Loco is a small restaurant chain, which sometimes brings disadvantages compared to larger competitors benefitting from better brand awareness and economies of scale.

As you can see below, the company's annualized revenue growth rate of 1.5% over the last four years (we compare to 2019 to normalize for COVID-19 impacts) was weak , but to its credit, it opened new restaurants and grew sales at existing, established dining locations.

This quarter, El Pollo Loco's revenue fell 3.2% year on year to $112.2 million but beat Wall Street's estimates by 2.9%. Looking ahead, Wall Street expects revenue to remain flat over the next 12 months.

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Same-Store Sales

A company's same-store sales growth shows the year-on-year change in sales for its restaurants that have been open for at least a year, give or take. This is a key performance indicator because it measures organic growth and demand.

El Pollo Loco's demand within its existing restaurants has generally risen over the last two years but lagged behind the broader sector. On average, the company's same-store sales have grown by 2.9% year on year. With positive same-store sales growth amid an increasing number of restaurants, El Pollo Loco is reaching more diners and growing sales.

In the latest quarter, El Pollo Loco's year on year same-store sales were flat. By the company's standards, this growth was a meaningful deceleration from the 4.7% year-on-year increase it posted 12 months ago. We'll be watching El Pollo Loco closely to see if it can reaccelerate growth.

Key Takeaways from El Pollo Loco's Q4 Results

We like that revenue outperformed Wall Street's estimates despite a slight same store sales miss. Adjusted EBITDA was in line with expectations Zooming out, we think this was a fine quarter. The stock is flat after reporting and currently trades at $9.17 per share.

El Pollo Loco may have had a good quarter, but does that mean you should invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.