Guzman y Gomez shares plunge as US sales dwindle amid weak demand

Feb 20 (Reuters) - Mexican fast-food chain Guzman y Gomez GYG.AX reported a better-than-expected first-half profit on Friday, but sluggish U.S. sales in a challenging consumer environment sent its shares plunging 16% to a record low.

Guzman y Gomez (GYG) debuted on the ASX in June 2024, marking the largest listing in Australia in three years. The company raised A$335.1 million ($236.45 million) in the third-biggest IPO in five years at the time that gave it a valuation of A$2.2 billion.

Regarded as a gauge of sentiment toward Australia's quick‑service restaurant sector, its ambitious plans to expand in the U.S. amid weak sales, higher prices and muted consumer spending have drawn investor wrath.

GYG's stock fell as much as 16.5% in early trading to A$17.00. That is about 23% below its IPO price of A$22, and 63% off its all-time high of A$45.99 reached a year ago.

"The company is executing well, but not as fast as the market is expecting," Citi analysts wrote.

"It's hard to see what's new in this result that would make investors chase the stock higher, especially given the valuation."

U.S. network sales jumped 67% to A$8.2 million in the first half, but came in below Visible Alpha's consensus of A$9.2 million. Inclement weather in the greater Chicago area in the December quarter also hurt comparable sales growth.

GYG continues to expect U.S. losses to increase slightly in the year to June, compared with an A$13.2 million loss in fiscal 2025. It also flagged sales momentum pressure in the short term following the end of its partnership with DoorDash DASH.O and shift to Uber Eats.

GYG's Australia segment, its biggest contributor to sales, reported first-half network sales of A$673.6 million ($475.29 million), 17.5% higher than last year, and forecast full-year profit margins of up to 6.2%, compared with 5.7% last year.

The fast-food chain operator reported net profit after tax of A$10.6 million for the six months to December 31, higher than the Visible Alpha consensus of A$9.2 million and last year's A$7.3 million.

Group network sales jumped 18% to A$681.8 million, although that missed the Visible Alpha consensus of A$687.3 million.

The company declared an interim dividend of 7.4 Australian cents per share.

($1 = 1.4172 Australian dollars)