The Guzman Y Gomez Ltd (ASX: GYG) share price is in focus after the Mexican food business reported its FY25 first-half result.
Guzman Y Gomez is a Mexican restaurant business with a presence in Australia (corporate and franchise stores), Japan (franchise), Singapore (franchise) and the US (corporate).
GYG FY25 half-year result
Here are some of the highlights from the six months to 31 December 2024:
- Network sales increased 22.8% to $577.9 million
- EBITDA increased 28.3% to $31.6 million
- Profit before tax up 51.4% to $15.2 million
- Net profit after tax (NPAT) soared 91.2% to $7.3 million
At the end of the period, there was a total of 210 locations in Australia, 20 in Singapore, five in Japan and four in the US.
GYG reported that Australian network sales increased 22.7% to $538.2 million, Singapore network sales went up 35.7% to $30.2 million and Japanese sales improved by 8.6% to $4.6 million. Overall, these three businesses saw comparable sales growth of 9.4%.
The company pointed to initiatives that help drive sales including strong growth in breakfast, expanded trading to 24/7 hours for 11 restaurants, effective marketing, additional menu items and increased involvement in digital and delivery.
GYG reported that in the first half of FY25, the median Australian franchisee performance was a return on investment (ROI) of 50%.
US troubles
The US segment had a challenging period. Guzman Y Gomez said that demonstrating the proof of concept in the US “remains a priority” for GYG and it’s aiming to grow its brand awareness and improve the guest experience there.
US network sales fell 12.7% to $4.9 million, the corporate restaurant margin worsened from 9% to 40.8%. Overall, the US segment underlying EBITDA loss sank 62% to $5 million.
Outlook for the Guzman Y Gomez share price
The company said it expects to exceed the FY25 net profit forecast, supported by various drivers.
In FY25, the company is expecting a corporate restaurant margin of around 17.8%, a franchise royalty rate of 8.3%, and general and administrative (G&A) to network sales of 6.7% (compared to the prospectus forecast of 6.8%).
The company also gave a trading update.
It said in the first seven weeks of the second half, the company said its non-US comparable sales growth had been above expectations at 12.2%. This was driven by the ongoing sales drivers from the first half and slower sales in the prior corresponding period.
The company intends to continue rolling out Australian and US restaurants, expand restaurant sales through various initiatives, improve margins (including the franchise royalty rate uplift and operating leverage), grow its digital sales, and drive growth in Singapore and Japan.
I think GYG seems like a great business with impressive long-term growth plans. However, it is priced for that success. While it’s doing well, I wouldn’t choose to invest at the pre-open price. I’d want to see a bit more international growth and success to justify future profit expectations.
