Guzman y Gomez Shares Surge on US Market Exit

Shares of Guzman y Gomez rose as much as 20.58% on Friday, after the Mexican-themed fast-food chain said it would exit the U.S. market and refocus on Australia.

"Having spent the last 3 months in the US, I realized this was going to take significantly more time and capital than we had expected, said Steven Marks, founder and co-CEO of the Australian food company.

He added that the current performance of the U.S. business could not justify continued investment of shareholder capital.

The company reiterated that the decision to exit the U.S. business "does not alter the Board's conviction in the global appeal of the GYG brand, or in the long-term opportunity to expand into new geographies in a disciplined and deliberate manner. "

The company, which will cease operating its restaurants in Chicago with immediate effect, also said that it will support its U.S. team through this transition "with the respect and integrity they deserve."

"We are supportive of today's decision to exit the US market given we had been skeptical about the company's US prospects," said Citi analysts Sam Teeger and Eileen Li in a note.

They added that the likelihood of long-term success in the U.S. is low, citing the lack of differentiation between GYG and rival Chipotle as well as structural challenges in Chicago.

"Pleasingly, the US exit means the Co-CEO, Steven Marks, will likely return to Australia to focus on local operations," the analysts said. They added that there is still "significant growth" in Australia, where the company has 237 restaurants, with a long term target of 1,000.

Guzman y Gomez first entered the U.S. market in 2020. Besides Australia, the chain is also operating in Singapore and Japan. The company aims to open more than 40 restaurants a year globally.

Shares last traded around 14% higher at 20.56 Australian dollars.