Adios! Aussie fast food chain suddenly exits US
An Australian-born Mexican-themed fast food chain is withdrawing from the United States in a spectacular turnaround in its American market ambitions.
Stock-listed Guzman y Gomez announced Friday that its restaurants in Chicago will cease trading immediately.
The decision was made because the financial performance of the US business was not acceptable or did not meet targets.
“I was always confident that our dining and guest experiences would differentiate, but that did not translate into an improvement in sales momentum,” said founder and co-chairman Steven Marks.
Guzman’s US experiment lasted nearly six years after it opened its first store in Chicago in January 2020.
“I realized this was going to take a lot more time and capital than we expected,” Mr. Marks said.
“The board and I have concluded that the business is unlikely to deliver performance that would justify continued investment in shareholder capital.”
In February, Guzman reported a net profit of $10.6 million in the first half of its fiscal year, on revenue of $261.2 million, up almost 45 percent.
But total cash earnings came in at $33 million, missing market estimates of $34.9 million to $35.9 million.
Even though global network sales rose 18 percent to $681.8 million, margins for new restaurants dragged, while an $8.3 million decline in U.S. equivalent items weighed on the result.
Its core Australian business had network sales of $673.6 million and earnings of $41.2 million.
Guzman reiterated on Friday that the Australian operation was still growing strongly.
“We have a long runway ahead of us in Australia as we move towards our long-term goal of 1,000 restaurants,” Mr Marks said.
Guzman currently has operations in Singapore and Japan under a master franchise agreement.
“We are proud of our international partners in Singapore and Japan and are seeing significant growth in each market,” Mr. Marks said.
“Today’s decision relates specifically to the United States; it is not a statement about GYG’s global potential.”
The exit from the US is expected to put pressure on the full-year profit and loss statement, with a one-off charge of between US$30 million and US$40 million.
On Thursday, RBC Capital Markets analyst Michael Toner upgraded Guzman’s shares to “outperform” with a $22 price target, thanks to the strength of its Australian business and opportunities to expand beyond 1,000 stores.
Its shares closed at $18 on Thursday, giving it a market cap of $1.8 billion.
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