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Mexican restaurant chain Guzman y Gomez (ASX: GYG) is abandoning the US market with immediate effect, shutting its Chicago restaurants after concluding the business is unlikely to justify continued shareholder capital investment.
The decision has been announced in tandem with an upgrade to GYG's Australian earnings guidance, leading to a surge in the company’s share price in early trading.
GYG now expects underlying EBITDA of $85 million in FY26, representing 29 per cent growth on the prior corresponding period.
The upgraded figure exceeds the company's previous guidance range of 6 to 6.2 per cent of network sales provided at its third-quarter trading update in April.
GYG says the US exit will trigger a one-off impact of between US$30 million and US$40 million in its FY26 full-year results, though the cash component is not expected to exceed US$15 million.
The withdrawal marks a sharp reversal for GYG's American ambitions.
The company's US segment, which comprises eight restaurants, reported underlying EBITDA losses of $8.3 million in the first half of FY26 on just $8.2 million in network sales, with corporate restaurant margins of negative 69.6 per cent.
Founder and co-CEO Steven Marks says the company has invested in product innovation, service improvements and marketing initiatives across its US locations but the returns have not materialised.
“I have always been confident in the differentiation of our food and guest experience, however this was not translating to an improvement in sales momentum,” says Marks.
“Having spent the last three months in the US, I realised this was going to take significantly more time and capital than we had expected.
“In assessing the trajectory of the current network, the board and I have concluded that the business is unlikely to deliver the performance that would justify continued investment of shareholder capital."
The exit allows GYG to redirect resources toward its core Australian business, which continues to outperform.
The company reported Australia segment underlying EBITDA of $66 million in FY25, meaning the upgraded $85 million target for FY26 implies the domestic operation is accelerating.
GYG has reaffirmed its long-term target of 1,000 Australian restaurants and says it remains focused on growing its international franchise markets.
“We have a long runway ahead of us in Australia as we progress towards our long-term target of 1,000 restaurants and segment underlying EBITDA as a percentage of network sales of 10 per cent,” says Marks.
“Concentrating our capital, focus and infrastructure behind this opportunity is the most effective way to compound shareholder value over the long term.”
The market responded emphatically following the announcement.
Shares in GYG surged more than 20 per cent to an intra-day high of $21.80, up from $18.08 yesterday.
The shares eased back to trade at $20.61 by 11.39am (AEST), up 14 per cent.
The share momentum was aided by RBC Capital Markets upgrading the stock to “outperform” yesterday with a $22 price target.
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