Guzman y Gomez shares rally on Q1 sales growth, $100m buyback
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More news: Shares in Guzman y Gomez climbed in morning trade after the Mexican food chain reported an uptick in sales for the first quarter and announced a $100 million share buyback.
GYG shares were up 4.6% to $28.24 at 11am AEDT, having dropped around 30% since the start of the calendar year.
RBC Capital Markets analyst Michael Toner said GYG's comparable sales growth of 4% was the "key number" in the trading update, and marked an improvement from the 3.7% growth disclosed for the first seven weeks of the quarter.
Toner also pointed to GYG's comments that comp sales have "improved" into the second quarter, corresponding with the release of GYG's new Caesar menu and the group's ramp-up in marketing and promotional spend.
Toner called the $100 million buyback "relatively small" and "unexpected in the context of a significant multi-year growth pipeline which is somewhat capital intensive, particularly for corporate drive-thru stores."
RBC has a 'sector perform' rating on the stock with a price target of $24.
Guzman y Gomez reports Q1 sales growth, unveils $100m buyback
The news: Fast food chain Guzman y Gomez has reported an 18.6% rise in first-quarter sales and announced a $100 million buyback to support the ongoing global restaurant rollout.
The numbers: GYG reported $330.6 million in network sales for the first quarter, up 18.6% compared to the prior corresponding period. Sales growth was slower than the 20.7% jump achieved a year earlier.
Australia sales were up 17.4% year on year to $305.5 million. Sales in GYG's Asian markets of Singapore and Japan grew 29.2% to $20.8 million, while its US segment jumped 65.4% to $4.3 million.
The group opened five new restaurants during the quarter, with three in Australia, and one each in Singapore and the US. There were no restaurant closures during the period.
GYG reaffirmed its full-year guidance and said it expected to open 32 new restaurants in Australia during FY26, with 12 of these expected in the second quarter.
The group also announced an on-market share buyback of up to $100 million, expected to commence in the second quarter.
The context: GYG said the global network sales increased during the first quarter, driven by comparative sales growth and its rollout of new restaurants.
The company said it expects sales momentum to improve into the financial year, supported by menu updates, daypart expansion, and marketing and digital initiatives.
What they said: "In light of this strong financial position, the board has determined that an on-market share buyback of up to $100 million represents an efficient use of capital and is in the best interests of shareholders," the company said.
"The buyback provides the opportunity to enhance shareholder returns, while maintaining capacity to fund GYG's significant growth ambitions."
The sources: ASX, RBC Capital Markets research
