)
Mexican fast-food chain Guzman y Gomez (ASX: GYG) is taking advantage of a depressed stock price to launch a $100 million share buyback - while also reporting solid gains for its business in the September quarter.
The company plans to begin the buyback in the current quarter, leveraging a "robust balance sheet" and describing the move as an efficient use of capital that is in the best interests of shareholders.
While GYG shares have rebounded off recent lows, the company’s stock plunged in August to a low of $22 - their 2024 issue price - despite announcing a record $1.2 billion in group sales for FY25.
The market sold down the shares due to an increase in costs for the group’s US expansion and a weak start in FY26 trading for its Australian operations.
After announcing the buyback and revealing another strong quarter of growth this morning, shares in GYG hit a high of $34.065 – up more than 26 per cent.
“The buyback reflects the company’s robust balance sheet and cash generation, while preserving capacity to fund the ongoing expansion of the restaurant network,” says GYG in this morning’s announcement.
“The buyback provides the opportunity to enhance shareholder returns, while maintaining capacity to fund GYG’s significant growth ambitions.”
GYG's network sales for the first three months of FY26 rose to $330.6 million, up 18.5 per cent from $260.2 million a year earlier.
Comparable-store sales growth in Australia was up 4 per cent, compared with 8.7 per cent the previous year, while US store sales for the latest quarter are up 6.7 per cent.
“In the US segment, sales momentum continued, driven by comp sales growth and the opening of one new restaurant in Des Plaines,” says the company.
“Guest-experience metrics remained strong driven by strong cultural alignment within restaurants and improved operational execution.”
GYG opened five new restaurants during the September quarter, comprising three in Australia, one in Singapore and one in the US, with the company noting there were no closures during the period.
This puts the GYG network, which also includes operations in Japan, at 84 corporate stores and 143 franchised stores globally at the end of September.
The company has affirmed it is on track to open 32 new restaurants in Australia this financial year, comprising 20 franchised outlets and 12 corporate restaurants. The bulk of these opening, totalling 23, will be drive-thru restaurants and the remainder in retail strips. GYG expects to open about 12 of these restaurants in the current quarter.
GYG has affirmed its forecasts announced with the release of the FY25 results in August that it is expecting sales momentum to increase in Australia.
“The company is expected to deliver strong sales growth in FY26 through menu innovation, daypart expansion, operational excellence, marketing and digital initiatives,” says GYG.
The company has also reaffirmed its previous guidance that Australian operations are expected to grow underlying EBITDA as a percentage of network sales by between 5.9 per cent and 6.3 per cent in FY26, up from 5.7 per in FY25.
Shares in GYG were trading at $27.70, up 70c, at 11.24am (AEDT).
)
