SYDNEY, Feb 21 (Reuters) – Guzman y Gomez (GYG.AX), a Mexican fast-food chain, reported disappointing first-half results on Friday, with its underlying earnings falling short of expectations. The decline in sales at its U.S. outlets raised concerns over its expansion plans in the competitive American market.
The company, which went public in Australia last year, posted underlying earnings before interest, taxes, depreciation, and amortization (EBITDA) of A$31.6 million ($20.21 million). This missed the Visible Alpha consensus of A$32.5 million and UBS’s estimate of A$35.9 million. Its underlying net profit after tax stood at A$7.3 million, also below the market consensus of A$10.8 million.
As a result, shares of Guzman y Gomez dropped by 14.3%, closing at A$38.58 in Sydney. This marked the stock’s lowest level since February 6, and it was on track for its worst trading day since July 2024.
The company’s performance in the United States was a major contributor to the disappointing results. U.S. operations experienced a widening underlying loss, with network sales falling 12.7%. Guzman y Gomez acknowledged that the U.S. market offers an opportunity to grow brand awareness and enhance the customer experience, but noted that network sales for the half-year were down.
The company had raised approximately A$335.1 million in Australia’s largest initial public offering (IPO) in three years.
However, much of its valuation is tied to future growth, with investors now questioning whether its U.S. expansion will succeed. This uncertainty led to increased selling pressure on the stock.
RBC Capital Markets analyst Michael Toner highlighted that U.S. sales were underperforming, coming in about 25% below the bank’s expectations. “The current valuation depends heavily on a successful U.S. expansion, which may receive heightened scrutiny from investors,” Toner said.
Additionally, Guzman y Gomez provided lower-than-expected guidance for corporate restaurant margins and general and administrative network sales for fiscal 2025.
On a positive note, the company indicated it was on track to exceed its initial profit forecasts for the financial year. The company’s Australian operations performed better, with same-store sales rising 9.4%, reaching A$573 million for the first half of the year. This growth was driven by strong demand for its breakfast menu and extended trading hours at 11 locations.
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