Shares of Mexican restaurant chain Guzman y Gomez tumbled to their lowest point ever on Friday, falling 16% despite the company posting first-half earnings that exceeded Wall Street expectations.
The fast-casual dining company went public on Australia’s stock exchange in June 2024 in what became the country’s largest public offering in three years. The initial public offering brought in A$335.1 million (equivalent to $236.45 million) and valued the business at A$2.2 billion, making it the third-largest IPO in Australia over a five-year period.
Investors have grown increasingly skeptical of the chain’s aggressive U.S. expansion strategy as American consumers pull back on dining spending due to rising prices and economic uncertainty. The company has become a bellwether for how Australia’s fast-food industry is performing overall.
During early Friday trading, GYG stock dropped as low as A$17.00 per share. This represents a decline of roughly 23% from its original IPO pricing of A$22 and sits 63% below the peak price of A$45.99 it reached twelve months ago.
Analysts at Citi observed that while “the company is executing well,” the pace “is not as fast as the market is expecting.”
They added: “It’s hard to see what’s new in this result that would make investors chase the stock higher, especially given the valuation.”
The company’s American operations saw network sales surge 67% to reach A$8.2 million during the first six months, though this figure fell short of analyst projections of A$9.2 million from Visible Alpha. Bad weather conditions around Chicago during the December quarter also negatively impacted comparable store sales performance.
Looking ahead, GYG anticipates that losses from its U.S. operations will grow modestly through June, building on the A$13.2 million deficit recorded in fiscal 2025. The company also warned of potential near-term sales challenges as it transitions from its DoorDash delivery partnership to working with Uber Eats instead.
In Australia, which remains the company’s primary revenue source, first-half network sales climbed to A$673.6 million ($475.29 million), representing a 17.5% increase from the previous year. Management projects full-year profit margins could reach 6.2%, up from 5.7% in the prior year.
For the six-month period ending December 31, the restaurant operator posted net profit after taxes of A$10.6 million. This beat analyst consensus estimates of A$9.2 million and improved upon last year’s A$7.3 million result.
Overall group network sales rose 18% to A$681.8 million, though this missed the Visible Alpha consensus forecast of A$687.3 million.
The company announced an interim dividend payment of 7.4 Australian cents per share.
