Guzman y Gomez shares sink as franchises soften
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More news: Guzman y Gomez shares have dropped more than 8%, despite the company appearing on track to beat its full-year profit guidance.
The Mexican food franchise saw franchise profitability slip to 50%, down from 53% in August, as it prioritised its ambitious goal of opening 31 new stores.
With investors focused on the balance between growth and profitability, the market reacted negatively, sending GYG shares lower in early trade.
GYG’s first-half result was otherwise largely in line with targets, with the company forecasting it will surpass its prospectus net profit guidance of $6 million. Analysts at RBC estimate the final figure will instead reach $15 million.
Group revenue came in slightly below expectations at $212.4 million, while EBITDA was on target at $31.6 million. Comparable store sales grew 12.2% — twice the rate of consensus estimates.
The biggest weak spot was the performance of GYG’s fledgling US network. Its Chicago stores generated just $4.9 million in sales, falling well short of expectations.
What they said: RBC analyst Michael Toner called the first half results "mixed", and emphasised the valuation pressure the $4.2 billion company may feel as a result.
"US network sales looks very soft relative to market expectations, coming in ~25% below us and market. While this segment is not material to group at this stage, we believe the current valuation hinges on a successful US expansion and this may receive outsized attention from investors," he said.
Guzman y Gomez swings to $7.3m profit, beats forecasts
The news: Mexican food chain Guzman y Gomez swung to a $7.3 million profit in the first half, topping estimates as the company rolled out 19 new restaurants across its global network during the period.
The numbers: The company, which listed on the ASX in June, was expected to post a $6.5 million net profit for the half, reversing its $4 million loss in the same period last year, according to Visible Alpha data.
GYG did not declare a dividend, and analysts don’t expect one until at least fiscal 2026.
The source: ASX
