By Rajasik Mukherjee and Byron Kaye
May 22 (Reuters) – Australia’s Guzman y Gomez , the Mexican-themed restaurant chain whose global growth plans powered a blockbuster sharemarket listing, said it was quitting the U.S. due to poor sales, a retreat from a prize market amid surging inflation.
The decision is an abrupt reversal from the company’s assurances as recently as February that it would stick with the market of 350 million people, where rival Chipotle has some 4,000 stores. GYG had eyed a gradual rollout there starting in Chicago, while aiming to match McDonald’s for store numbers in Australia.
But the U.S. remained challenging as fuel, food and employment costs hurt margins, and analysts had started to describe the market as a negative for near-term earnings and shares which have traded below their 2024 issue price.
GYG shares rose by up to a fifth after the U.S. exit announcement and were still 14% higher at A$20.61 by midsession, below the A$22.00 issue price, as analysts updated forecasts to include a smaller total addressable market but also the absence of future U.S. losses.
“The U.S. business had very low prospects of being successful, and the losses of the business were weighing down the earnings of the group so the sooner exit than anticipated is positive,” said RBC Capital Markets analyst Michael Toner.
A day earlier, Toner said in a client note that leaving the U.S. would have a 15% benefit on GYG’s gross profit.
Co-CEO Steven Marks said in a statement that stronger sales momentum had failed to materialise and the company needed “significantly more time and capital” to scale in the U.S.
On an analyst call, GYG chief financial officer Erik Du Plessis declined to comment on the impact of the Iran war on U.S. economy except to say “there’s obviously a lot happening in the markets” which the company had factored into forecasts.
The company said it would also take a one-off hit of between $30 million and $40 million in its results for the year to June, subject to audit, adding that these costs were not expected to affect its final dividend for 2026.
The company added that it expected underlying pre-tax profit around A$85 million for Australia in the year, up 29% on a year earlier.
($1 = 1.3986 Australian dollars)
(Reporting by Rajasik Mukherjee and Byron Kaye; Editing by Shailesh Kuber)
Comments