The Guzman Y Gomez Ltd (ASX: GYG) share price jumped 15% after giving an update about its US strategy and Australia segment.
Guzman Y Gomez is a Mexican food business that has both corporate and franchise restaurants in Australia, as well as franchises in Japan and Singapore.
US exit
GYG announced to the ASX that it has decided to exit the US market and will cease trading at its Chicago restaurants immediately.
The business thanked its US team for their work and then explained why it’s closing the operations.
Guzman Y Gomez noted that it has been clear about the thresholds the business needed to meet to prove the concept of GYG in the US.
While there has been progress on the brand and guest experience, the financial performance of the US business “has not been acceptable and is not meeting targeted hurdles”.
The GYG founder and co-CEO Steven Marks said:
I have always been confident in the differentiation of our food and guest experience, however this was not translating to an improvement in sales momentum. Having spent the last 3 months in the US, I realised this was going to take significantly more time and capital than we had expected. In assessing the trajectory of the current network, the Board and I have concluded that the business is unlikely to deliver the performance that would justify continued investment of shareholder capital.
The board still thinks there’s global appeal for the GYG brand and that it has a good long-term opportunity to expand into new geographies in a “disciplined and deliberate manner”.
Singapore and Japan continue to “strong sales growth and healthy unit economics”. Both markets are planning new restaurant openings in the next 12 months.
As a result of the US exit, it expects to recognise a one-off impact of between US$30 million to US$40 million in the FY26 result. The cash component of this exit is not expected to exceed US$15 million, relating to future payment of lease liabilities, employee costs, contractual commitments and other exit costs.
Australia performance
GYG said that the Australian business is in a solid position, with strong growth, world-class unit economics and a “significant network growth opportunity”.
The business said the quantity and quality of sites in the real estate pipeline continues to grow and GYG remains on track to open 32 restaurants in FY26.
GYG expects to deliver Australia segment (which includes Japan and Singapore) underlying EBITDA (EBITDA explained) of $85 million in FY26, representing 29% growth on the prior year.
Marks said:
We have a long runway ahead of us in Australia as we progress towards our longterm target of 1,000 restaurants and segment underlying EBITDA as a percentage of network sales of 10%. Concentrating our capital, focus and infrastructure behind this opportunity is the most effective way to compound shareholder value over the long-term.
Outlook for the GYG share price
The company’s performance in the Australian segment continues to be positive. Growing underlying EBITDA at around 30% is a good growth rate. In a few years from now, it could make a lot more profit.
The market hasn’t been a huge fan of GYG’s efforts in the US because of how much it would cost to succeed in the market there. I think the business may be able to succeed in other markets where there’s less (entrenched) competition, such as the UK.
If it’s successful on its long-term goals, I think it’s one of the ASX growth shares to watch.
