By Colin Kruger and Jessica Yun
Mexican-inspired fast-food chain Guzman y Gomez is hoping to flog more breakfast burritos to tradies to keep pace with the expectations of investors, who have received more than $1.5 billion in rising stock gains just two months since listing on the ASX.
GYG founder and co-chief executive Steven Marks said breakfast sales, driven by its $8 breakfast burrito, rose 18 per cent last year and now account for 6 per cent to 7 per cent of overall sales. The target in the “next couple of years” is for breakfast items to make up 10 per cent of sales.
The sales pitch is delivering for Guzman y Gomez founder, Steven Marks. Credit: Renee Nowytarger
“We believe it’s the best thing we sell at GYG. We just haven’t told a story around breakfast enough,” said Marks. “It’s going to be a focus of ours moving forward.”
GYG’s full-year results beat its prospectus forecasts but could not keep up with market expectations, with its shares dropping as much as 9 per cent on Tuesday to $32.54 despite delivering sales and underlying earnings above forecasts. Sales in Australia rose 7.4 per cent for the first seven weeks of the current financial year.
Cost-of-living pressures have led Australians to order fewer steaks and chicken schnitzels at the pub and buy more private-label goods at the supermarket. “People are being very discerning with which fast food they’re buying,” Marks said.
In response to some concerns expressed on social media about shrinking portion sizes, the co-chief executive said the business would not compromise on the quality of food.
“We will never, ever decrease the size of our portions to trick customers. It’s not the values and the ethics of this business,” he said.
After tumbling in the morning, the share price settled and closed 2.5 per cent higher.
GYG shares were listed at $22 in June but rocketed more than 30 per cent within hours of their debut to $30, despite concerns about the company’s valuation. The group said on Tuesday it remained on track to achieve its prospectus forecasts for fiscal 2025.
Sales across the global franchise network rose 26.4 per cent to $959.7 million, driven by new store openings and growing sales at stores that were already open.
A breakfast burrito being prepared at a Guzman y Gomez store.Credit: Bloomberg
Revenue for GYG, which operates its own stores and collects service fees from its franchisees, rose 32 per cent to $342 million, while the group’s losses rose to $13.7 million from $2.3 million the prior year as it funded expansion in Australia and overseas.
Wilson Advisory’s James Ferrier noted that the local sales growth of 7.4 per cent for the year-to-date was also ahead of IPO prospectus forecasts of 4.8 per cent.
“A modest beat on financial year 2024 guidance and a strong start to financial year 2025 [same store growth] represents encouraging momentum in the business,” he said.
The group expects to open 31 restaurants in Australia in 2025, on top of the 194 restaurants that were open in Australia at the end of the 2024 financial year.
The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.