News

Taco Cabana, Pollo Tropical Q1 results dragged down by lease-accounting changes

May 7, 2019

Fiesta Restaurant Group Inc., parent company of Taco Cabana and Pollo Tropica, blamed its Q1 declining revenues on changes in lease accounting.

"Due to recent changes in accounting standards, particularly with respect to lease accounting, it may be difficult to appreciate the progress we have made in improving our operating margins and positioning the company for greater profitability in the future," Fiesta President and CEO Richard Stockinger said in the financial results release. 

For the the 13-week period that ended March 31, Fiesta reported that revenues fell 2.1% from the same period last year, while Taco Cabana comp sales dropped 0.5 percent and Pollo Tropical comp sales sank 2.6 percent during the quarter, according to Fiesta's Q1 2019 sales results. 

If the brands had not had to comply with the lease-accounting standard in the quarter, Stockinger said Pollo Tropical's Q1 2019 adjusted EBITDA of $14.3  million would have been $0.4 million higher, while Taco Cabana's Q1 2019 adjusted EBITDA of $2.9 million would have been $0.5 million higher.

"We generated higher first quarter Adjusted EBITDA and Restaurant-level Adjusted EBITDA margins compared to the year-ago period, despite the negative impact of an increase in expense resulting from the new lease accounting standard. These improvements come from our constant focus on improving our operations and managing costs, while enhancing the experience and value proposition for our customer.

"However, we have yet to realize the benefits of this enhanced customer experience in terms of comparable restaurant sales growth. Comparable restaurant sales improved sequentially through the first quarter at Pollo Tropical due primarily to the relaunch of our 'Pollo Time' everyday value platform while trends at Taco Cabana were choppy in part due to unfavorable weather."

Other key Q1 2019 financials highlights include: 

• Revenues down to $165.9 million from $169.5 million in the prior year's quarter. 
• Net income dropped to $2.3 million (8 cents per diluted share) from $4.2 million (15 cents per diluted share last year's quarter. 
• Adjusted net income of $4.1 million (15 cents per diluted share) from adjusted net income of $4.3 million (16 cents per diluted share) in Q1 2018. 
• Consolidated adjusted EBITDA up to $17.2 million from $17 million last year's quarter. 

Stockinger said the company's renewal plan changes, along with an array of sales initiatives, along with digital, social media, traditional marketing actions will deliver improved results going forward. Other strengths cited as the brand moves through 2019 included what Stockinger called a strengthened DoorDash partnership, as well as initiatives related to B-to-B and B-to-C catering.