Guzman y Gomez is profitable and will beat prospectus profit forecast
Guzman y Gomez is doing a roaring trade in tacos and brekkie burritos, positioning it to beat its prospectus profit forecasts but an earnings miss has sent the shares diving.
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The morning rush for a brekkie burrito and a coffee has emerged as a crucial, and lucrative, trading window for Mexican-themed restaurant chain Guzman y Gomez as the recently listed company emerged profitable in the December half and is positioned to beat its profit prospectus forecast.
Underpinning its growth too have been 19 new store openings in the last half to take its total global store count to 239, with plans for another 103 sites in the pipeline as its army of real estate executives scour the country for locations.
The company believes it can eventually have as many as 1,000 stores across Australia in a bid to rival fast-food giant McDonald’s.
However, despite booming sales in Australia its burgeoning presence in the US has struggled, with weaker sales and the four stores in the US reporting a pre-tax loss.
Softer sales and earnings in the US along with underlying group earnings for the first half that undershot market expectations did however take some off the shine off the result, triggering a 12 per cent slide in the share price to $39.50 as the market opened on Friday. Its expected margins for corporate owned restaurants also concerned some analysts who had pencilled in higher targets.
However, among consumers the restaurant chain remains a hit.
In Australia its range of brekkie burritos, especially popular with tradies in the morning, and its other menu items like the $3 taco have proved a hit, with Guzman y Gomez reporting on Friday a 27 per cent rise in half-year revenue to $212.49m as it booked a profit of $8.12m, up from a loss of $4.347m in the previous corresponding period. No dividend was declared.
It expects to exceed its fiscal 2025 profit prospectus forecast.
Guzman y Gomez founder and co-chief executive Steven Marks said the company’s first-half performance and growth in sales and earnings showed the popularity of its food, but also the strong execution of strategy.
“Our strong 2025 half-year results demonstrate the appeal of our clean, fresh, made-to-order, Mexican-inspired food, leading to significant global network sales growth of 23 per cent,” he said.
“The growth in network sales contributed to a 28 per cent earnings uplift as corporate restaurant margins expanded and franchise revenues increased.
“This result was led by Australia and reflects momentum driven by the delivery channel, our impactful marketing and demand for value menu items like our $12 Chicken Mini Meal.”
The company said it was experiencing growth across all parts of the day, particularly breakfast with 19 per cent same store sales growth in the morning. Sales and earnings were also hiked up by expanded 24/7 trading hours at 11 restaurants.
Mr Marks said the restaurant’s morning trade was emerging as a key trading window for its stores.
“For GYG you can have breakfast, lunch, dinner, and we got the drive throughs, we have got 24/7 stores now, and breakfast is so key for us.
“We think it’s the best thing that we sell on our menu. The breakfast burrito was $8 plus a beautiful coffee ... nobody does it. For that value, for that quality, for breakfast, people are loving it.
“And if you think about the US, everybody eats breakfast burritos, and it’s going to be happening here in Australia as well, just because the product is so delicious, So I think you’ll continue to see really strong growth in our in our breakfast segment across GYG.”
He added that amid the cost-of-living crisis shoppers were looking for value, which he believes Guzman y Gomez delivers on in terms of its $3 tacos or its $12 chicken mini meal deal as well as other options on the menu,
At its Australian stores - which is the bulk of its global store network - sales achieved 9.4 per cent comparative sales growth, with total sales up 22.7 per cent to $538.2m. This drove group network sales of $573m.
In Singapore, where it has 20 stores, sales rose 35.7 per cent to $30.2m and for its five stores in Japan, sales rose 8.6 per cent to $4.6m.
It’s four stores in Chicago reported a 12.7 per cent decline in sales to $4.9m and that arm’s earnings worsening to a loss of $5m, up from a loss of $3.1m, as it invests heavily in the business to deliver its high-quality experience to diners.
In terms of outlook, Guzman y Gomez said in the first seven weeks of the second half, Australia store comparative sales growth was above expectations at 12.2 per cent.
Wilsons Advisory analyst James Ferrier said the profit was above his forecast and he was “enthused” by the store rollout opportunity in Australia which was supported by strong store unit economics and a well-resourced balance sheet.
“A strong beat on prospectus, coupled with a robust first seven weeks of like for like sales growth ... leaves us encouraged. The near-term store rollout remains on track, while a growing pipeline of approved sites provides confidence in the medium-term expansion.”
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Originally published as Guzman y Gomez is profitable and will beat prospectus profit forecast
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