Guzman y Gomez (GYG) has reported a strong first-half performance, with net profit reaching $10.6 million, surpassing the Visible Alpha consensus of $9.2 million. This positive result also led to an interim dividend of 7.4¢ per share, exceeding the anticipated 6¢. However, despite the profit beat, concerns remain about the company’s sales growth and margins.
Guzman y Gomez is an Australian-based fast-food chain specializing in Mexican cuisine. The company operates both corporate and franchised restaurants across Australia and overseas. According to Citi analyst Sam Teeger, the company’s chicken strategy has helped stabilise costs, and franchisee profitability has improved, with median Australian franchise restaurant margins rising to 21.4 per cent from 20.2 per cent year-on-year.
Despite these positives, comparable sales growth in Australia was slower than expected, coming in at 4.4 per cent compared to the consensus of 5.2 per cent. Corporate margins also weakened to 17.6 per cent, below the Visible Alpha consensus of 18.1 per cent, partly attributed to underperformance in strip restaurants and delivery services. Citi anticipates Australian EBITDA margins of 6 to 6.2 per cent and 32 new stores in FY26.
Teeger noted that while Guzman y Gomez is executing well, it may not be meeting the market’s expectations for rapid growth. He believes it is difficult to identify new factors in this result that would drive investors to pursue the stock, especially given its current valuation. Citi maintains a ‘sell’ rating on the stock. Shares in Guzman y Gomez were last down by 8.4 per cent following the announcement.
