AUS
NZ
UK
CA
USA
FRA
GER
ESP
ITA
NLD
PRT
SWE
GRC
IND
POL
BRA
ZAF
RUS
CHN
UAE
_08_27_2024_02_02_55_759478.jpg)
Guzman y Gomez (ASX:GYG) has made a notable start to the new financial year, achieving an impressive 7.4% increase in same-store sales growth in Australia over the first seven weeks. This performance surpasses initial expectations, signaling a robust growth trajectory for the Mexican-themed fast food chain.
Key Highlights
- Sales Growth and Popular Offerings: The company's Australian operations have seen a notable uptick in same-store sales, driven by popular value offerings such as the $12 Chicken Mini Meal. Additionally, the breakfast category has experienced an 18% increase in same-store sales for the 2023-24 fiscal year. The breakfast burrito, featuring bacon, chorizo, scrambled eggs, and hash browns, has become a favorite among customers, particularly tradies.
- Stock Performance: Despite the positive sales performance, Guzman y Gomez shares saw a 5% decline in early trading, settling at $34. This dip follows a significant rise since the company's IPO on June 20, where shares were initially priced at $22, surged to $30 on debut, and closed at $35.85 on Monday. The company's market capitalization now stands at approximately $3.6 billion, up from $2.2 billion at its IPO.
- Financial Performance: For the year ending June 30, Guzman y Gomez reported network sales of $959.7 million, surpassing prospectus forecasts by 0.6%. On a statutory basis, the company recorded a net loss of $13.7 million for 2023-24, which was 15.1% better than anticipated.
Market Comparison
The performance of Guzman y Gomez contrasts sharply with that of its fast food competitors, such as KFC operator Collins Foods and Domino’s Pizza. Both companies experienced share price declines last week due to disappointing trading updates. Collins Foods warned of profit margin pressures from rising wages and energy costs, while Domino’s Pizza reported weaker-than-expected same-store sales for the early weeks of 2024-25.
Expansion and Future Plans
Guzman y Gomez operates 194 outlets in Australia, with additional locations in Singapore, Japan, and the United States. The company plans to open 31 new outlets in Australia and three in the United States during 2024-25. The long-term goal is to expand to 1,000 outlets in Australia within the next 20 years.
Focus on Breakfast and Customer Growth
Co-CEO Steven Marks highlighted the company's commitment to expanding its share of the breakfast market, which currently accounts for around 6-7% of total sales. Guzman y Gomez aims to enhance its coffee offerings and continue targeting the 18 to 35-year-old demographic, which has shown strong growth.
Competitive Landscape
The Australian fast food market, valued at $25 billion, remains highly competitive. Collins Foods and Domino’s Pizza face challenges, with Collins Foods anticipating reduced profit margins and Domino’s struggling with its international markets. In contrast, Guzman y Gomez's Australian operations are thriving, with 103 out of 194 outlets achieving record sales for lunch and dinner.
Bottomline
Guzman y Gomez's strong start to the financial year, despite recent stock market fluctuations, underscores the company's solid market position and growth potential. With a focus on breakfast and continued expansion, Guzman y Gomez is well-positioned to capitalize on evolving consumer preferences and maintain its upward trajectory.
