The Australian chain Guzman y Gomez (GYG.AX), a Mexican-themed restaurant chain whose global growth plans fueled a high-profile IPO, announced its withdrawal from the United States due to poor sales, marking a retreat from a highly coveted market amid rampant inflation.
This decision marks a stark reversal from assurances given by the company last February that it intended to remain in this 350 million-person market, where its competitor Chipotle possesses around 4,000 restaurants. GYG had planned a gradual rollout starting from Chicago, aiming to surpass the number of McDonald’s restaurants in Australia.
However, the United States remained a challenge, with rising fuel, food, and labor costs weighing on margins. Analysts had already started to view this market negatively for short-term profits, with shares trading below their 2024 IPO price.
GYG stock surged by nearly a fifth following the US withdrawal announcement, still showing a 14% rise at 20.61 Australian dollars mid-session, below the 22.00 Australian dollar IPO price, as analysts adjusted their forecasts for a smaller potential market but with no future US losses.
“The prospects of success in the US business were very weak, and the losses from this business were weighing on the group’s results; this quicker-than-expected withdrawal is therefore positive,” said Michael Toner, an analyst at RBC Capital Markets.
On the previous day, Michael Toner had informed clients in a note that the US withdrawal would have a positive effect of 15% on GYG’s gross margin.
Co-CEO Steven Marks stated in a release that the expected sales growth momentum had not materialized, and that the company needed “much more time and capital” to develop in the US.
During a conference call with analysts, GYG CFO Erik Du Plessis declined to comment on the impact of the conflict in Iran on the American economy, simply stating that “there are obviously a lot of things happening in the markets,” which the company had factored into its forecasts.
The company also indicated that it would incur a one-time loss of between 30 and 40 million dollars in its results for the fiscal year ending in June, pending audit, noting that these costs should not affect its 2026 dividend balance.
The company added that it expected an underlying pre-tax profit of approximately 85 million Australian dollars for Australia for the year, a 29% increase from the previous year.
(1 USD = 1.3986 Australian dollars)
