Guzman y Gomez (GYG) has announced an immediate exit from the US market, shuttering all of its Chicago restaurants after failing to meet performance targets. The Australian burrito chain expects a one-off profit-and-loss charge of US$30 million to US$40 million in fiscal year 2026, with cash exit costs capped at approximately US$15 million. The company emphasized that these costs will not affect its final FY26 dividend or ongoing share buyback program.
Shares of GYG surged by as much as 20% on Friday, as investors broadly supported the decision to abandon a loss-making overseas expansion. The stock had previously fallen over 30% from its initial public offering price in 2024, weighed down by the underperforming US operations. Analysts had increasingly viewed the US unit as a short-term earnings headwind rather than a growth driver.
Founder and co-CEO Steven Marks noted that while the US business made progress in brand awareness and customer experience, these improvements did not translate into sustained sales momentum. After spending three months in the US, Marks concluded that the market would require significantly more time and capital than originally anticipated. The company described the US unit's financial performance as "not acceptable" and stated that it was not meeting internal targets.
The exit marks a strategic pivot back to Australia, where management sees stronger returns and ample growth opportunities. GYG raised its guidance for Australia segment underlying EBITDA to approximately A$85 million, representing a 29% increase over the prior year. The company reaffirmed its commitment to opening 32 new restaurants this financial year and maintaining its long-term target of 1,000 outlets in Australia.
RBC Capital Markets analyst Michael Toner described the US exit as a positive move, noting that the unit had "very low prospects" and its losses were dragging down group earnings. Toner estimated that withdrawing from the US could boost GYG's gross profit by 15%. This sentiment was echoed across the market, with the stock rallying sharply on Friday.
GYG's US venture began in 2020 with the opening of eight Chicago locations. The chain aimed to replicate its Australian success in a market dominated by established players like Chipotle, which operates approximately 4,000 US outlets. However, the company struggled to gain traction amid intense competition from numerous Mexican and Latin American brands. In February, GYG had indicated it would stay the course in the US, but the weak sales trajectory ultimately forced a reassessment.
Despite the US pullback, GYG remains committed to international expansion in other markets. The company highlighted strong sales growth and robust unit economics in Singapore and Japan, where operations are led by master franchise partners. Singapore recently opened its 24th store. Marks emphasized that the US decision is specific to that market and does not reflect on GYG's global potential.
The shift in focus will place greater emphasis on Australia as the primary growth engine. However, challenges remain, including site selection, new store openings, and maintaining margins in a competitive environment. The exact financial impact of the US exit is subject to audit, with further details expected in the full-year report.
