Guzman y Gomez beats sales expectations in Australia
The Mexican-themed fast food chain has bolstered its credentials as a high growth stock, posting better than expected sales growth in its flagship Australian operations.
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Mexican-themed fast food chain Guzman y Gomez has bolstered its credentials as a high-growth stock, saying its sales were above expectations for the first quarter, putting it on track to hit prospectus forecasts for earnings in 2025.
Guzman y Gomez, whose shares have raced ahead by 33 per cent since its stock market debut in June and which in September was added to the S&P/ASX 200 index, said on Thursday that comparable sales growth in the Australia segment – its key region with the most number of stores – had been better than expected.
This was helped by strong delivery performance, successful execution of the ‘Clean is the New Healthy’ campaign and guest demand for value menu items such as the $12 Chicken Mini Meal, the fast food chain said in an ASX statement.
The company, which now has a market capitalisation of nearly $4bn, has booked first quarter sales in Australia of $260.2m, up from $214.8m over the same period last year.
The Mexican-themed restaurant has 194 stores in Australia, its key region, and has around 20 stores stores spread across Singapore, Japan and a burgeoning presence in the US with four outlets.
Guzman y Gomez has caused a headache for some investors and analysts trying to value the stock and its high-growth promises that are based on a fast-food chain that currently has 226 stores but which is promising to race towards 1000 stores to match it with fast-food powerhouse McDonald’s in Australia.
Shares in Guzman y Gomez rose slightly on the trading update on Thursday which showed total sales rose to $278.8m from $230.9m a year earlier.
Guzman y Gomez said in its trading update that the US segment had performed in line with expectations during the quarter, with the prior corresponding period benefiting from initial higher sales associated with new restaurant openings. US sales were down slightly to $2.6m from $2.7m.
Sales in Japan rose to $2.5m from $2m and in Singapore sales lifted to $13.6m from $11.4m. Overall, the company said it expects to meet its prospectus forecasts for the 2025 financial year, including the opening of 31 new restaurants in Australia.
According to its prospectus, Guzman y Gomez is forecasting fiscal 2025 sales of $428.2m, earnings of $59.9m and a net profit of $6m.
Shares in the Guzman y Gomez float were offered to the public at $22 each and last traded at just under $39.
At its full-year results in August, the company showed it was stripping away diners from rival fast-food chains, especially younger people, as its breakfast burritos proved a smash hit with tradies in the morning and its cheap menu items hit a “sweet spot” in terms of pricing amid the high cost of living.
Guzman y Gomez easily beat earnings expectations and forecast robust growth for the first weeks of 2025, as its major fast-food rivals such as KFC and Domino’s Pizza struggle to attract customers who are instead making a line for the chain’s breakfast burritos, nachos and $3 tacos.
Guzman y Gomez reported a statutory net loss of $13.678m for 2024, as expected, although pro forma net profit of $5.7m, up 94.1 per cent, was 71.2 per cent ahead of prospectus forecasts. Its revenue for 2024 of $342.2m was up 32.1 per cent, and 0.7 per cent better than its revenue target issued in its prospectus. Comparable sales growth of 8.1 per cent was primarily driven by restaurants in Australia.
RBC Capital Markets analyst Michael Toner said the first quarter trading update showed its Australia and Japan stores were posting strong momentum and above analyst forecasts while trading in the US was softer than RBC tipped.
“Result is broadly in line with our expectations, with Australia and Japan stronger and US weaker; however, market may have been anticipating an upgrade to prospectus forecasts for fiscal 2025,” he said.
“We are attracted to the strong unit economics in the Australian store network and see Guzman y Gomez as well-funded and well-resourced to pursue its growth strategy,” said Wilsons Advisory analyst James Ferrier.
Mr Ferrier said like-for-like sales momentum had continued into the first quarter with sales for the first seven weeks of 2025 trading up 7.4 per cent and is tracking ahead of the 2025 IPO prospectus forecast of 4.8 per cent growth.
“And we expect the digital channel to be an important driver of this strong growth,” he added.
GYG closed 0.2 per cent higher to $38.71 on Thursday.
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Originally published as Guzman y Gomez beats sales expectations in Australia
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