El Pollo Loco Expands With Another Outlet In California

Leading fire-grilled chicken chain, El Pollo Loco Holdings, Inc. (NASDAQ:LOCO) , opened its latest outlet in Riverside, CA, on Sep 14. The 4,000-square-foot restaurant, located at Van Buren Blvd., can accommodate more than 60 guests.

The outlet features the brand’s new Vision Design and has an open kitchen layout to display the preparation of its signature dish. Also, this marks El Pollo Loco’s seventh restaurant in Riverside.

Currently, the company has more than 470 company-owned and franchised restaurants in Arizona, California, Nevada, Texas and Utah. Moreover, it is looking to expand its presence in key markets through franchisees and company-owned stores. To this end, El Pollo Loco has already opened about 17 restaurants year to date with another eight to open soon enough, in the coming weeks.

However, this fire-grilled chicken chain loses out in terms of international presence. While other restaurant chains like Yum! Brands, Inc. (NYSE:YUM) , McDonalds Corporation (NYSE:MCD) and Papa John’s International, Inc. (NASDAQ:PZZA) pursue aggressive global expansion policies, El Pollo Loco seems to be weak on this front.

Additionally, shares of the company have underperformed its industry year to date. The stock declined 6.9%, as against the industry’s growth of 6.4%. Moreover, the Zacks Consensus Estimate for current-quarter and current-year earnings have moved down 5.3% and 2.9%, respectively, over the past 60 days.

Furthermore, a challenging sales environment given lower consumer spending in the U.S. restaurant space remains a potent headwind to the company’s top line. Meanwhile, higher costs related to sales initiatives and wage rate increases may continue to hurt profits too.

Nevertheless, continuous expansion plans are expected to add immensely to the top line and boost its overall performance as well.

Going forward, El Pollo Loco further expects to drive growth through a number of initiatives such as its authentic advertising campaign, its recently launched mobile and online ordering app, loyalty program and delivery system. Also, menu innovation and limited time offers are likely to boost traffic at its restaurants.

Currently, El Pollo Loco has a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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