Can Guzman y Gomez Sustain Rapid Expansion Amid Rising Costs and US Losses?
Guzman y Gomez (GYG) has reported a record FY25 with $1.2 billion in network sales and a 152% jump in net profit, underpinned by strong comp sales growth and rapid restaurant expansion. The company also declared its first dividend and outlined ambitious plans for continued growth and margin improvement.
- Global network sales reach $1.18 billion, up 23%
- Australia segment underlying EBITDA climbs 45% to $66 million
- Net profit after tax soars 152% to $14.5 million
- 32 new restaurants opened in Australia, with 9.8% comp sales growth
- Maiden dividend declared at 12.6 cents per share
Record-Breaking Financial Performance
Guzman y Gomez (ASX – GYG) has delivered a standout FY25, crossing the $1 billion mark in global network sales for the first time, reaching $1.18 billion; a 23% increase year-on-year. This robust top-line growth translated into a 45% rise in Australia segment underlying EBITDA to $66 million and an impressive 152% surge in net profit after tax to $14.5 million. The company’s maiden dividend declaration of 12.6 cents per share marks a significant milestone for shareholders.
Expansion and Operational Excellence Drive Growth
Central to GYG’s performance was the opening of 32 new restaurants in Australia, a record for the company, alongside a strong comparable sales growth of 9.8%. The company’s strategic focus on drive-thru formats, which now represent 47% of corporate restaurants, contributed to a healthy average restaurant margin of 22% for drive-thrus. GYG’s relentless emphasis on food quality, guest experience, and operational efficiency underpinned these results, with innovations such as the 'Clean is the New Healthy' campaign and menu enhancements like Street Corn and Pulled Shiitake Mushroom recipes resonating well with customers.
Franchise Model and US Market Progress
GYG’s franchise network remains a pillar of strength, boasting a median franchisee return on investment of 50% and strong profitability with 20% franchise restaurant margins. The company continues to support franchisees through royalty relief programs and operational improvements. Internationally, the US segment showed promising momentum, with network sales growing 13% and a notable 57% sales increase in Q4 FY25 following investments in labour and culture to enhance the guest experience. Although US corporate restaurant margins remain negative, GYG is confident that ongoing sales growth and operational leverage will drive margin improvements in FY26.
Strong Balance Sheet and Future Outlook
GYG maintains a robust balance sheet with no debt and a cash position predominantly held in term deposits, providing flexibility for aggressive network expansion. The company plans to open 40 restaurants annually in Australia over the next five years, targeting a 10% underlying EBITDA margin in the Australia segment by then. Key drivers include a shift towards higher-margin drive-thru formats, increased franchise royalty rates through a tiered structure, and operating leverage that will reduce general and administrative costs as a percentage of sales.
Navigating Challenges and Sustaining Momentum
While FY26 has started with a slightly softer comp sales growth of 3.7% in the first seven weeks, GYG attributes this to timing effects related to marketing campaigns and menu launches. The company remains confident in its growth trajectory, backed by a strong pipeline of 98 board-approved sites and ongoing investments in digital delivery platforms, marketing, and menu innovation. The US market, though still in its early stages, is expected to continue its upward trajectory with two new restaurant openings planned and improved profitability anticipated over time.
Bottom Line?
GYG’s FY25 results cement its position as a fast-growing disruptor in fast casual dining, but investors will be watching closely as the company scales its US footprint and navigates evolving market dynamics.
Questions in the middle?
- How quickly can GYG improve profitability in its US operations amid ongoing investments?
- Will the company sustain its strong comp sales growth as it scales to 1,000 Australian restaurants?
- How will rising input costs and competitive pressures impact margins and pricing strategies?
