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Portillo's CEO Michael Osanloo joins Yahoo Finance Live to explain how inflation has impacted sales and unintended effects on their customers, which they are trying to minimize.
BRIAN CHEUNG: Hey, how's it going, Michael? I just want to ask you about those earnings if you've got me here. Give us the breakdown exactly how the quarter went for you and what the demand for hot dogs is looking like.
MICHAEL OSANLOO: Look, we had a great quarter. We're really happy about the performance. We're happy about the revenue trajectory. We're happy about how we're performing with guests. And I think the market liked what they saw with our earnings and our revenue. So we feel pretty good.
DAVE BRIGGS: Michael, what are you seeing from the consumer? How much pricing power do you have? Have you been forced to raise prices?
MICHAEL OSANLOO: Yeah, you know, I think the consumer is fragile. And I think that we have been very, very disciplined on how we have priced. So I think you guys have seen we've shared in the past that we are lagging inflation with pricing because we're very strong believers in providing as much value as possible to our guests. And so we take that responsibility seriously, right?
In an inflationary environment, whether or not we're in technical recession, consumers feel the pinch. And we want to make sure that they don't feel the pinch nearly as badly when they come to Portillo's. Offering delicious hot food at a great price point with great operations is a winning formula for us. So we feel really good about where we stand with the consumer.
BRIAN CHEUNG: So, Michael, does that imply, then, that you're willing to eat a little bit in the margins if that means making sure that you can get customers and keep them coming through the doors?
MICHAEL OSANLOO: I honestly-- I couldn't hear a thing that you just said, so I'm sorry. Our volume is glitchy right now.
BRIAN CHEUNG: Yeah, no, I'll repeat that for you, Michael. I was just wondering if what you just said implies that you're willing to eat a little bit of margin to keep customers coming into the stores.
MICHAEL OSANLOO: Yeah. A little bit, right? And it's the art of the long view. So in the short-term, we might-- and this happened to us in the first quarter. I think most of the analysts picked up on this. In the first quarter, we had sort of low 20 ish margins. And in the second quarter, we just posted 25.5% restaurant level margins.
I'm a huge believer that investing in the consumer pays off in the medium and longer term. Consumers who have a great experience will keep coming back to us. And so-- and, you know, it's like an old Saturday Night Live skit, but we make it up in volume, right? Our volumes are so strong that if we can get people to come back a few more times, we perform well. And the entire P&L looks great.
DAVE BRIGGS: What type of shift are you seeing in your customers as we do factor in some of these recessionary concerns, as your customers do tighten their wallet?
MICHAEL OSANLOO: Yeah, you know, I actually think we are a beneficiary of when that happens. So I think when customers are doing a little bit of belt tightening, the reality is, they're still going to eat, right? And so whether they're eating at home and buying groceries, which have gone up double digits in terms of inflation, whether they're going into a more casual dining setting and sitting down or not, they're going to go and eat somewhere.
I like where we sit because I think for a lot of people in a tough economic environment, we are a wonderful tradedown option. And we've seen that in past recessions where, in a recession, Portillo's tends to be where the consumer goes, as opposed to leaving us to go to other options.
BRIAN CHEUNG: Michael, we spoke with you about three months ago. And we were talking about staffing. You say that normally, you get about 100 to 110 staff per store. You recently hired more than that in a store that you opened up, I think it was in St. Petersburg, you mentioned when we last spoke.
I'm wondering, as the recessionary fears kind of happen right now, you're wondering if higher rates are going to kind of tighten the belts for hiring businesses right now, are you still being that aggressive in hiring out there right now, or you're starting to think about taking down some of those job postings or maybe even layoffs?
MICHAEL OSANLOO: Certainly not the latter. That's not where we are, right? So what I'm thrilled about is that we are staffed as well as we were pre-COVID. And we pay above market wages right now. We offer an amazing suite of benefits. And we genuinely believe in taking great care of our people, right? It's the servant leadership model. We take great care of our team members. They take great care of our guests. That is paying out in spades for us right now.
We have guest satisfaction scores, value scores, and speed of service scores that are at 24-month highs for us. That reiterates what we're doing, right? Invest in our teams, invest in our consumers, build this business to be super successful for the medium and long-term. So definitely not layoffs. If anything, we're still hiring. But we're taking the cream of the crop at this point.
DAVE BRIGGS: Good stuff. All right, so we've been showing your food for the last five minutes, but truth be told, Michael, I've never been to Portillo's. So I'm going to put you on the spot here. I must have lived in the wrong places. What's the one thing I have to order when I finally get there?
MICHAEL OSANLOO: Oh, that's not even a hard question. You have to get an Italian beef sandwich dipped with peppers. Once you try that-- I mean, and I'll tell you what. We're bringing the beef bus out to New York for our investor day on November 8. And so we'll be set up right outside the NYSE, and we'll give you guys an opportunity to come and try a beef sandwich hot, fresh, and fast.
BRIAN CHEUNG: Oh, I'm coming with.
DAVE BRIGGS: We're coming.
BRIAN CHEUNG: Yeah, we're gonna be there.
DAVE BRIGGS: Me and Brian are going to be there. But we wouldn't mind having you in studio personally bringing that beef sandwich because that would be a pleasure. Mike Osanloo, good to see you, sir. Thank you.
MICHAEL OSANLOO: Thank you very much.