El Pollo Loco: Balancing Promising Innovations with Traffic Growth Challenges

Benchmark Co. analyst Todd Brooks has maintained their neutral stance on LOCO stock, giving a Hold rating on March 7.

Todd Brooks has given his Hold rating due to a combination of factors surrounding El Pollo Loco’s recent performance and future prospects. The company reported better-than-expected results for the fourth quarter of 2024, with revenues slightly surpassing consensus estimates and improved restaurant-level margins. Despite these positive outcomes, Brooks remains cautious as El Pollo Loco enters a phase where traffic growth will be crucial to maintain same-store sales momentum, especially as the effects of previous price increases are absorbed.
Moreover, while the company is poised for culinary innovation and brand repositioning in 2025, Brooks notes that the success of these initiatives will depend on consumer reception and the ability to drive traffic. The company’s strategy to focus on quality and value rather than competing solely on price is promising, yet its execution remains to be seen. Additionally, the potential for franchise growth is contingent on continued operational improvements and cost reductions, which, if successful, could enhance the company’s long-term prospects. Thus, Brooks’s Hold rating reflects a balanced view of the current opportunities and challenges facing El Pollo Loco.