Note: This post is written for my personal trading record purpose only, so this should not be taken as any form of investment advice or guidance to follow. Discussion is welcome, while you must do your own research for our own risks.
Discussion
What is El Pollo Loco?
El Pollo Loco is a quick-service Mexican restaurant chain known for its delicious fire-grilled chicken. With over 475 locations across the United States, they offer a menu that includes tacos, burritos, bowls, and salads, all centered around their signature citrus-marinated chicken cooked over an open flame. If you’re craving flavorful chicken, El Pollo Loco is definitely worth a visit.
Is El Pollo Loco popular in the United State?
El Pollo Loco has gained popularity in the USA for several reasons:
Flavorful Chicken: Their signature fire-grilled chicken is marinated with citrus and cooked over an open flame, resulting in juicy, flavorful meat.
Affordability: El Pollo Loco offers tasty Mexican-inspired dishes at reasonable prices, making it accessible to a wide range of customers.
Variety: Their menu includes tacos, burritos, bowls, and salads, catering to different preferences.
Consistency: El Pollo Loco has maintained its quality and cooking methods for over 40 years, creating a loyal customer base.
Overall, it’s a go-to spot for those seeking delicious, affordable chicken meals.
Why is Mexican food liked in the United State?
Mexican cuisine’s popularity in the United States can be attributed to several factors:
- Rich Flavors: Mexican food offers a vibrant blend of flavors, thanks to ingredients like avocados, corn, tomatoes, chilis, beans, and limes. These flavors resonate with diverse palates.
- Healthy Ingredients: Authentic Mexican dishes often include healthy components such as avocados, beans, and savory meats. The use of fresh ingredients contributes to its appeal1.
- Cultural Influence: Mexican cuisine has deep roots, influenced by indigenous traditions and later shaped by Spanish conquistadors. Over time, it became popularized through Tex-Mex offerings like burritos2.
- Affordability: Mexican food encourages consumer trial due to its cost-effectiveness. Many meals are priced under $10, making it accessible to a wide audience3.
In summary, the rich flavors, healthy ingredients, cultural heritage, and affordability contribute to the widespread love for Mexican food in the United States.
Is El Pollo Loco a listed company?
El Pollo Loco is a publicly traded company. It is listed on the NASDAQ stock exchange under the ticker symbol LOCO.
As of June 7, 2024, El Pollo Loco Holdings, Inc. (LOCO) stock is trading at $10.36 per share on the NasdaqGS, with a market cap of approximately $306.3 million1. Here’s a summary of its recent performance:
- 1-Year Return: 9.28%
- 3-Year Return: 29.51%
- 5-Year Return: 7.67%
How is LOCO’s financial performance and growth recently?
Let’s dive into El Pollo Loco Holdings, Inc.’s recent financial performance:
- Total Revenue: In Q1 2024, the company’s total revenue increased by 1.4% to $116.2 million compared to Q1 2023.
- Company-Operated Restaurant Revenue: It decreased by 0.7% to $97.2 million due to refranchising activities.
- Franchise Revenue: Rose by an impressive 17.3% to $11.3 million, driven by new restaurant openings and increased sales.
- Net Income: GAAP net income was $5.9 million, or $0.19 per diluted share. Adjusted net income was $6.8 million, or $0.22 per diluted share.
- Restaurant Contribution Margin: Improved significantly to 17.6% from 15% year-over-year, thanks to higher menu prices and operational efficiencies.
Overall, El Pollo Loco Holdings is navigating growth amidst challenges, with positive points such as comparable restaurant sales increases and franchise revenue growth. However, there are also challenges, including labor inflation and restructuring costs.
What are the challenges that LOCO is facing?
El Pollo Loco Holdings, Inc. faces several challenges in its operations:
- Labor Inflation: Like many restaurant chains, El Pollo Loco grapples with rising labor costs. As minimum wages increase and competition for workers intensifies, managing payroll expenses becomes crucial. Balancing employee compensation with profitability is a delicate dance.
- Restructuring Costs: The company has incurred expenses related to restructuring efforts. These costs can arise from changes in organizational structure, streamlining operations, or adapting to market shifts. While necessary for long-term viability, they impact short-term financials.
- Competition: The quick-service restaurant industry is fiercely competitive. El Pollo Loco competes with other fast-food chains, local eateries, and even grocery stores offering prepared meals. Staying relevant and differentiating themselves in this crowded space is a constant challenge.
- Supply Chain Disruptions: Global supply chain disruptions affect the availability and cost of ingredients. Whether due to transportation issues, weather events, or geopolitical factors, these disruptions can impact El Pollo Loco’s ability to maintain consistent menu offerings.
- Consumer Preferences and Trends: Consumer tastes evolve, and health-conscious choices are on the rise. El Pollo Loco must adapt its menu to cater to changing preferences while retaining its signature flame-grilled chicken offerings.
- Real Estate Costs: Securing prime locations for new restaurants can be expensive. Balancing the benefits of visibility and foot traffic with the associated costs is crucial for expansion.
Despite these challenges, El Pollo Loco continues to innovate, expand, and serve its loyal customers.
Setup Summary
| Date | Ticker | Action | Reference | Reference Price | Justification | Position | Price | Size | Stop Loss | Risk Tolerance | Risk Exposure% | Risk Exposure$ |
| 07/06/2024 | LOCO | Entry | 20MA | 10.45 | Volume contract at 20MA | 1200 | 10.52 | 12,624 | 10.25 | 20MA-2% | -2.57% | -$324.00 |
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