Guzman y Gomez shares plunge as US sales disappoint

By Nichiket Sunil, Sameer Manekar and Kumar Tanishk

Feb 20 (Reuters) – Mexican fast-food chain Guzman y Gomez’s ASX-listed shares slumped to a record low on Friday, as investors ignored a half-yearly profit beat for disappointing U.S. sales.

GYG shares closed down nearly 14% at A$17.53, making it one of the biggest drags on the benchmark S&P/ASX 200 index, which was 0.1% down. It had earlier slumped as much as 16.5% to A$17. 

The firm reported net profit after tax of A$10.6 million ($7.46 million), higher than last year’s A$7.3 million and beating the Visible Alpha consensus of A$9.2 million. The company expects U.S. losses to increase slightly in the year to June from A$13.2 million last year.

Hayden Beamish, portfolio manager at Endeavor Asset Management, called the earnings beat “noise”.

The company’s appeal to investors has rested on its potential to crack the U.S. fast‑casual market. It was a central part of its 2024 IPO pitch, which priced the stock at A$22 with a valuation of A$3 billion, leaving the stock vulnerable when its American momentum falters. 

GYG’s valuation has always depended on a successful U.S. expansion, and without clear progress there, investors feel they’re paying a growth multiple for what is essentially an Australian fast‑food chain, said Beamish.

GYG also flagged short-term U.S. sales momentum pressure after it shifted to Uber Eats from DoorDash.

U.S. sales jumped 67% to A$8.2 million ($5.77 million) in the first half, below Visible Alpha’s consensus of A$9.2 million. Inclement weather in the greater Chicago area in the December quarter also hurt comparable sales growth.

Considered a gauge of sentiment toward Australia’s quick‑service restaurant sector, the company’s local segment, its biggest contributor to sales, reported a 17.5% sales increase to A$673.6 million, and forecast full-year profit margins of up to 6.2% from 5.7% last year.

Group network sales jumped 18% to A$681.8 million, missing the Visible Alpha consensus of A$687.3 million.

The company declared an interim dividend of 7.4 Australian cents per share.

($1 = 1.4209 Australian dollars)

(Reporting by Sameer Manekar and Nichiket Sunil in Bengaluru, additional reporting by Kumar Tanishk; Editing by Jonathan Ananda, Maju Samuel and Harikrishnan Nair)