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Chicago Tribune
03-03-2025
- Business
- Chicago Tribune
Activist investor gets tough on Portillo's
Chicago's hometown hot dog giant Portillo's is in the midst of an ambitious national expansion, and now a proxy fight may be brewing in its boardroom. Activist investor Engaged Capital, which took a nearly 10% stake in the Oak Brook-based company last year, said Monday that it has nominated two independent candidates to the company's board. Engaged said it was 'forced' to resort to the public nominations of former Wingstop CEO Charlie Morrison and marketing executive Nicole Portwood after months of private discussions around adding Morrison to the board didn't go anywhere. 'We remain ready and willing to reach a constructive resolution that spares all stakeholders an election contest,' Engaged said in a news release Monday. Portillo's is in the midst of an ambitious national expansion plan, with a goal to grow its fleet of just under 100 restaurants by hundreds over the next two decades. The company, which has been opening restaurants in Texas, Arizona and elsewhere, hopes to transform itself from a mostly regional chain to a truly national one, betting that Italian beef sandwiches and Chicago-style hot dogs will have wide appeal outside the Midwest. But the company has struggled with its stock valuation, which despite an approximately 50% jump since the start of the year is still down more than 60% since it was taken public by Boston-based private equity firm Berkshire Partners in 2021. Representatives for Portillo's did not immediately return a request for comment Monday morning. Engaged has maintained it thinks the company can succeed, but only if it makes changes to how it does business. Engaged, which previously led an activist campaign at Shake Shack, has pushed Portillo's to open smaller stores, for instance. The activist, which called the company's marketing practices 'ineffective' in the Monday news release, thinks Portillo's needs to increase its brand awareness outside the Chicago area, perhaps by opening in high-visibility locations, such as airports, people familiar with the matter told the Tribune last year. Portillo's has previously shown willingness to listen to Engaged, which now owns about 8% of the company. Last month, Portillo's announced it was adding Chipotle executive Jack Hartung to its board after being introduced to him by Engaged. Still, Engaged said Monday that Portillo's still needs to 'refine its approach to new unit development, modernize restaurant operations and related technology, and deploy targeted marketing investments to increase awareness and drive traffic.' Portillo's revenue increased 4.5% in 2024, the company said in fourth-quarter earnings release last week. But that growth primarily came from new restaurant openings. Same-store sales declined 0.6% during the same period. When Engaged announced it had taken a stake in the company last summer, people familiar with the matter said conversations between the parties were constructive, and that a leadership change was not on the table. For the time being, Engaged is not focused on making management changes at Portillo's, people familiar with the matter said. Portillo's, which was founded in a Villa Park parking lot in 1963, was family-owned until it was acquired by Berkshire about a decade ago.
Reuters
03-03-2025
- Business
- Reuters
Exclusive: Activist investor Engaged launches proxy fight at restaurant chain Portillo's
Summary Companies Engaged nominates restaurant executive Morrison, marketing expert Portwood to eight-member board Nominations follow private discussions about adding Morrison Portillo's added Chipotle executive Hartung to board this year NEW YORK, March 3 (Reuters) - Activist investor Engaged Capital is ready to run a boardroom fight at restaurant chain Portillo's (PTLO.O), opens new tab and has nominated two director candidates to the company's eight-member board, three people familiar with the matter said. Engaged, which owns roughly 7.3% of the company, has been pushing for months for improvements, such as boosting restaurant-level performance, modernizing outdated locations and strengthening national marketing, said the sources who requested anonymity to speak about the private discussions. The nominees, restaurant operator Charlie Morrison and marketing executive Nicole Portwood, will be on the ballot at the company's annual shareholders meeting later this year unless the two sides reach a settlement beforehand. Portillo's, known for its Chicago-style hot dogs, crinkle-cut fries and chocolate cakes, is valued at roughly $1 billion after its shares closed at $13.97 on Friday. While the stock has jumped 51% this year on measures to boost sales, it remains down about 63% since being listed publicly in 2021. A Portillo's representative was not immediately available for comment. More companies are preparing for costly and potentially noisy fights as investors push for changes, including operational improvements and putting them up for sale, to increase their stock price. Engaged, run by former Relational Investors executive Glenn Welling, has a strong track record in the food and consumer sectors, having spurred a turnaround at casual restaurant chain Shake Shack (SHAK.N), opens new tab and sale of fine dining chain Del Frisco's. Engaged has succeeded in adding more than a dozen directors to boards over the past five years, industry data show. For months, Engaged held private talks with Portillo's about adding Morrison, a former CEO of restaurant chain Wingstop (WING.O), opens new tab, to the board, the sources said, noting that he had profitably expanded restaurant chains and overseen shareholder returns of more than 700% at Wingstop. In January, Portillo's named Chipotle Mexican Grill (CMG.N), opens new tab Chief Financial Officer Jack Hartung, who was introduced to the company by Engaged, to its board. But Engaged believes Portillo's needs even more operational and marketing expertise to help push for faster changes and therefore nominated Morrison and Portwood, a former chief marketing officer at Tito's Handmade Vodka, the sources said. Engaged in 2023 nominated three director candidates at Shake Shack before entering into a settlement that added two new members to the chain's board. Shake Shack's share price has doubled since Engaged built its stake in early 2023.
