El Pollo Loco Continues To Expand, Opens Store In Arizona

Leading fire-grilled chicken chain, El Pollo Loco Holdings, Inc. (NASDAQ:LOCO) , currently has more than 470 restaurants in Arizona, California, Nevada, Texas and Utah. The company is looking to further expand its footprint in key markets through a mix of franchisee and company-owned stores.

In fact, El Pollo Loco has opened 18 restaurants year to date, with another seven slated to open in the coming weeks.

On Sep 21, the company opened its latest 2,660-square-foot outlet in Scottsdale, AZ. Located at 15255 N. 64th St., the resturant can accommodate about 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, it marks El Pollo Loco’s third restaurant in Scottsdale and 24th in the greater Phoenix area.

However, despite vigorous domestic expansion, El Pollo Loco 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 has been down 13.9%, as against the industry’s growth of 8.3%. Moreover, earnings estimates for current quarter and current year have moved down 5.3% and 2.9%, respectively, over the past 60 days.

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, this chicken chain's continuous expansion plans are anticipated to add immensely to the top line and boost its overall performance as well.

Going forward, El Pollo Loco expects to drive growth through a number of initiatives such as its authentic advertising campaign, the 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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