News

Cruddy Q1 California weather, late Lent drag down Del Taco quarterly results

May 7, 2019

Del Taco, featured on this week's QSRweb podcast, said its Q1 2019 financials suffered from inclement California weather and a later-than-usual Lenten season for the 12 weeks that ended March 26 this year. 

Comparable system-wide sales fell slightly (down 0.1%) for the quarter, dragged down by a 0.6% drop in company-operated comp sales, due largely to a drop of 5.5% in transactions. Nonetheless, franchised stores comp sales took up some of the slack by growing 0.4% for the quarter, a news release said. 

Other key results for Q1 2019 include: 

• Total revenue grew 1.5% to $114.2 million compared to $112.6 million in Q1 2018.
• Company-operated stores' average check growth of 4.9%.
• Total revenue up 1.5 percent from Q1 2018 to $114.2 million.
• Company-operated restaurant sales up 0.8% from Q1 2018 to $105.9 million.
• Adjusted net income dropped to $1.7 million, or 4 cents per diluted share, compared Q1 2018 adjusted net income of $3.2 million, or 8 cents per diluted share.
• Adjusted EBITDA fell to $12.1 million from the Q1 2018 level of $13.9 million, attributed to negative impacts from the use of a new lease accounting standard. 
• Four franchised restaurant openings and one franchised restaurant closure. 
• Three franchised restaurants bought by company. 
• 13 restaurants refranchised under company's restaurant portfolio optimization program.

 "While our Mix2 and seasonal seafood promotions performed well in the quarter, driving nearly 1% of menu mix at company-operated restaurants, comparable restaurant sales and transactions were adversely impacted by unfavorable weather in California and throughout the West, as well as a delayed Lenten season," President and CEO John D. Cappasola Jr. said in the release. 

"However, our second quarter comparable restaurant sales have returned to positive territory as we cycled the Lenten calendar shift and began to benefit from our transaction-driving initiatives including our digital transformation, value evolution and menu innovation. We are encouraged by this sequential improvement and are pleased to reaffirm our guidance for the full year."

Cappasola said the brand's recently introduced Del App now has more than 500,000 registered users. The brand plans to add online ordering for  pickup or delivery to the app's functions this summer. 

Likewise, company-operated stores will add third-party delivery providers, Postmates and DoorDash, to the current Grubhub service later this year. 

"During the quarter we enhanced our value platform with the March launch of $4, $5 and $6 'Fresh Faves' box meals which were met with strong demand and we are incredibly excited about our most recent menu innovation, the Beyond Taco and Beyond Avocado Taco, which launched system-wide on April 25."

Cappasola said the company's portfolio optimization strategy is spawning unit development and better AUVs.