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Guzman Y Gomez (ASX:GYG) has seen a fairly rollercoaster day on Thursday: after releasing an earnings update, shares shot up to $29 a share, nearing its former $30/sh+ valuations; but as of 1pm AEDT, the company sunk back down to just south of $27/sh, with intraday gains thereby erased.
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Right now, the stock is looking like one where long-term holders quickly rush in to take profits. If that sounds harsh, check out Guzman’s intraday trading chart for Thursday, October 9, as at 2pm AEDT.
For a company that has once said it is trying to take on McDonald’s in Australia with a mission to open 1,000 stores as well as a dual-mission in the U.S. where it wants to compete with an already saturated Latin fast food market in the States, it’s first worth noting what might be driving valuations back to around $27.
That’s short-selling pressure. Guzman y Gomez is currently one of the most shorted stocks on the market, with Australian short sellers currently covering some 11% of Guzman y Gomez’s total shares on issue.
But then, the fundamentals revealed in GYG’s latest earnings also pose some areas of concern for the reasonably minded, not lost in the hot sauce.
At the end of Q1 of FY26, Guzman y Gomez has added nearly 30 new stores around Australia, which isn’t anything to scoff at but does show perhaps a slower pace to notch 1,000 stores than some may have hoped.
Then there’s also the fact that Guzman y Gomez is a fast food outlet competing with an increasingly health-conscious market, the fundamental reason many fast food brands internationally have been struggling (obviously, there are exceptions to the rule, but it’s broadly true).
Secondly, network sales growth was actually slower in Q1 FY26 than it was this time last year, at 18.6% (Q126) vs 20.7% (Q125). So not a dramatic decline, but definitely not an increase – at best, you could say it remains more or less flat.
Despite opening thirty new stores over the last year, which is the same amount it expects to open across all of FY26. A slow march to 1,000 stores indeed. (This finance journalist doesn’t claim to possess a superior strategy for the company to adopt in opening stores, but big promises come with big expectations.)
“As stated in its FY25 results, GYG expects sales momentum to improve from the levels achieved in Q1 FY26. The company is expected to deliver strong sales growth in FY26 through menu innovation, daypart expansion, operational excellence, marketing and digital initiatives,” GYG wrote on Thursday under a subheading titled ‘Outlook.’
“Operational excellence.” What does that mean, exactly? Especially because too much efficiency in any restaurant, and especially a fast food outlet, often leads to pissed off customers. Too little, and you piss off both customers and shareholders. Dangerous game.
GYG last traded at $26.90/sh.
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