Guzman y Gomez shares rally for second consecutive session on US exit
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More news: Shares in Guzman y Gomez rallied in early trade after the Mexican food chain announced its exit from the US market following a failure to meet financial targets.
Shares jumped 17.04% to $21.16 at 11:04am AEST.
RBC Capital Markets analyst Michael Toner viewed the exit as a positive and maintains an outperform rating on the stock.
Toner noted that the US business had very low prospects of success and its losses were weighing down the group’s earnings. He added that an earlier-than-expected exit is a positive move, given he did not forecast the US business to break even until FY37.
He also highlighted that guidance to open 32 additional Australian restaurants is positive news, as local expansion remains the key driver of GYG’s earnings growth over the next few years. Toner maintains a $22 price target on the stock.
Guzman y Gomez exits US market, flags up to $56m one-off FY26 hit
The news: Guzman y Guzman (GYG) will exit the US market and close its Chicago restaurants, effective immediately, after flagging that the business failed to meet financial targets.
The context: The Mexican fast-food chain said its US operations have not met financial thresholds, with CEO Steven Marks noting that scaling in the US took significantly more time and capital than initially anticipated.
As a result of the exit, GYG expects a one-off loss between USD30 million ($42 million) and USD40 million ($56 million) in its FY26 results. The cash component of the exit is not expected to exceed USD15 million, however the company added that this will not impact its full-year dividend.
The company said it will refocus entirely on its Australian business and growth, remaining on track to open 32 additional restaurants across the country this financial year.
GYG will also amend its blackout period to commence from the close of trading on 30 June, while its previously announced buy back remains active.
What they said: “Having spent the last three months in the US, I realised this was going to take significantly more time and capital than we had expected,” Marks said.
“In assessing the trajectory of the current network, the board and I have concluded the business is unlikely to deliver the performance that would justify continued investment of shareholder capital,” he added.
The sources: ASX, RBC Capital analyst note
