Thursday, May 12 2022

Chicago’s beloved restaurant chain, Portillo’s, went public last month, and at first it seemed like a very successful start. But just weeks after opening the company, Portillo’s is experiencing its first stumble, thanks to the latest earnings report that outlines its struggles with labor and ingredient costs.

While the company recorded an increase in its turnover of 15.3%, its operating profit fell by 8.8%. The chain was spending more money on wages (hourly wages were nearly 20% higher this quarter) to retain employees, and paying more for ingredients like beef. Additionally, the channel revealed that it was still understaffed.

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These factors ended up causing its stock to fall almost 22% after the release of quarterly results. Although at the end of the day the stock price had recovered somewhat and was only down about 10%, the decline still represented the wipeout of millions of dollars in value.

This contrasts sharply with the chain’s IPO on October 21, when some 20.3 million shares were made available at an expected sale price of $20 per share. When markets opened that day, the shares were already at $26 and by the end of the trading day, they had almost reached $40, doubling in value. For several weeks, Portillo’s stock price climbed, hitting a high of over $55 on November 17.

Given the success of the public offering, the chain’s goal of reaching 600 locations within the next 25 years comes as no surprise. Still, the plan is ambitious given that its current footprint consists of 67 restaurants – that would represent 900% growth.

Opened by Dick Portillo as a hot dog stand called The Dg House in 1963, Portillo’s would become a staple in the greater Chicago area. It remained an entirely Illinois-based phenomenon until the early 2000s when it finally expanded to California. Locations in Arizona, Wisconsin, Florida and several other states followed over the next decade and a half.

The restaurant is popular for its sandwiches, pastas and burgers, but especially for its hot dogs and sausages, of which there are half a dozen varieties.

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