The Guzman Y Gomez Ltd (ASX: GYG) share price under the spotlight after the Mexican food business announced its FY25 third quarter sales.
GYG has 241 Mexican food restaurants, with 211 in Australia, 20 in Singapore, four in Japan and six in the US.
FY25 third quarter sales update
Guzman Y Gomez said it has continued to deliver strong sales growth, while the store network numbers increased. During the period, it added three new GYG restaurants in Australia and two in the US.
Total network sales grew 23.6% to $289.5 million, with Australian sales rising 23% to $267.6 million and Singapore sales growing 33.9% to $16.6 million. Japan sales rose 23.5% and US sales increased 23%.
The business reported that its Australia, Singapore and Japan segment achieved comparable sales growth of 11.1%. This was thanks to growth across all channels, dayparts (different times of the days such as breakfast and late), formats (drive-through, strip and other) and ownership (company-owned and franchise).
Guzman Y Gomez said daypart growth was a highlight, with an acceleration of sales growth in breakfast and after 9pm trading. The expansion of the number of restaurants trading 24/7 helped.
The Mexican restaurant business said the US segment sales rose due to the new restaurants, but guest experience metrics improved through the quarter, thanks to a “deliberate investment” in restaurant labour.
FY25 guidance affirmed
The company said it still expects to open 31 new restaurants in Australia.
GYG also said its corporate restaurant margin is on track to be 17.8% and the franchise royalty rate is expected to be 8.3%. It also said the general and administrative costs to network sales ratio of 6.7%.
Overall, the company expects to beat its IPO prospectus forecast for FY25 net profit.
GYG dividend
The company also announced the implementation of its dividend policy, supported by its “strong balance sheet and cashflow generation”.
While retaining enough money for growth, the business expects to distribute the majority of earnings to shareholders each year.
The first dividend is expected to be paid in September 2025 following the release of the FY25 result.
Final thoughts on Guzman Y Gomez shares
GYG isn’t cheap, but its share price has come back a long way and its sales continue to grow at a strong pace.
I think it’s a great business, with strong growth potential. It’s still not cheap today, but it’s better value in my opinion. As a long-term investment, I think it’s fairly appealing today.
