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Always found it odd that they wanted to try the US market, it's pretty flush with better Mexican-style food. It'd be like me trying to open a chain of mediocre-quality sushi restaurants in Japan...

[https://www.afr.com/companies/retail/guzman-y-gomez-calls-it-quits-on-us-as-losses-deepen-20260522-p5zzpe]

Guzman y Gomez has waved the white flag on its ambitious and costly six-year attempt to break into the world’s largest fast-food market, saying it will immediately exit the US and shut its outlets in Chicago after they failed to meet financial targets.

Investors welcomed the news, pushing the shares in the Mexican fast-food chain up nearly 20 per cent to $21.56 after founder and co-chief executive Steven Marks conceded operating in the US was no longer viable. Many investors had regarded the company’s overseas foray as a drain on its Australian business.

Co-chief executive Steven Marks in the kitchen of Guzman y Gomez’s outlet in Schaumburg, Illinois. Kamil Krzaczynski

Before Friday, shares in Guzman y Gomez fell more than 40 per cent over the past 12 months, largely because of the US expansion not meeting expectations.

Since the company floated in 2024, chief executives Steven Marks and Hilton Brett had urged shareholders to be patient and said the chain simply needed time to gain traction in the US market.

Marks, who is originally from New York but is now based in Sydney, decamped to the US for three months earlier this year in a bid to get Guzman y Gomez’s overseas expansion back on track and calm jittery shareholders.

But Marks called time on Friday, saying the financial performance of the US business had not been acceptable and was not meeting targeted hurdles.

“I realised this was going to take significantly more time and capital than we had expected. In assessing the trajectory of the current network, the board and I have concluded that the business is unlikely to deliver the performance that would justify continued investment of shareholder capital.”

The share price surge comes despite the company flagging that the US exit would result in a one-off impact of $US30 million ($42 million) to $US40 million, though it would not impact its dividend payout.

Marks told investors that he expected group earnings to increase and higher dividends would follow.

Barrenjoey analyst Tom Kierath said the US exit was expected to “reduce management distraction”, which would lead to improved performance for its main Australian business.

“Very few investors saw the US becoming successful, and we think US losses precluded some investors from investing,” Kierath said. “The strong Australian performance and growth outlook now become the key focus of the market.”

Guzman y Gomez entered the US in 2020 with its flagship store in Naperville, in suburban Chicago. At the time, the board had approved 15 outlets, but the company only managed to open eight stores because of intense competition in the crowded fast-food market and deepening losses.

The company said it would revert to focusing on its core Australian market, where it expected underlying earnings before interest, depreciation and amortisation of about $85 million for the 2026 financial year, which translates to 29 per cent growth on the prior period.

In Australia, Guzman y Gomez’s sales have continued to grow, more recently from increased delivery orders through a new partnership with Uber Eats. It reported sales of $345.9 million for the third quarter of the financial year, a rise of nearly 20 per cent for the same time one year earlier.

RBC Capital Markets analyst Michael Toner said Guzman y Gomez, which has about 250 Australian stores and a target of increasing that to 1000, was arguably undervalued after investor backlash over its US plans. He said the chain could open 1300 Australian restaurants.

“Something (among many) that differentiates GyG is its store pipeline, which we believe underpins most of its near-term earnings growth,” Toner said.