The Investment Thread

The market is hammering Portillo’s after its Q1 results. Mostly because of a 1.2% decline in revenue year or year. Which is kinda surprising because they have more restaurants now than last year.

On the surface that is not good. But several restaurants saw declines in Q1. With Portillo’s though I think the decline was very much weather related.

The Midwest and the rust belt had some pretty intense winter storms in Q1. Which shut down entire cities. This especially hurt Portillo’s in that 50% of all of its restaurants are located in Illinois and Indiana.

Portillo’s (with a market cap of $730 million) makes more profit that Cava (valued at $9 Billion).

Portillo’s makes more annual revenue than Wingstop (valued at $11.5 Billion). Portillo’s is doing that with only 85 restaurants compared to Wingstop’s 1,900 restaurants.

It’s hard to put in perspective how busy the Portillo’s restaurants are. Each store brings in over 7 million annually. That dwarfs Chipotle and McDonald’s. Even in Chicago where Portillo’s has been around for years, some of these locations still need police on weekends to help facilitate traffic.

Throughout the rest of the country there are Facebook communities to organize ride shares so people who live a few hours away can carpool to the nearest Portillo’s.

The company also does not take on new debt to build new restaurants. They use their cash flows to do it.

Berkshire partners bought Portillo’s in 2014 for $1 Billion. And the current valuation is $730 million??

In a few years when the restaurants exceed 120 locations and they raise prices this stock will soar. The raising prices thing is low hanging fruit and an easy lever to pull. To date they have purposely not done it at newer locations.

My gut is someone is hammering the stock in an attempt to offer a low ball offer to take it over.