Why Guzman y Gomez, KMD, Mineral Resources, and Pilbara Minerals shares are sinking

These shares are ending the week in the red. But why?

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The S&P/ASX 200 Index (ASX: XJO) is having a reasonably positive finish to the week. In afternoon trade, the benchmark index is down 0.2% to 7,787.2 points.

Four ASX shares that are failing to follow the market higher today are listed below. Here's why they are falling:

Guzman y Gomez (ASX: GYG)

The Guzman y Gomez share price is down almost 5% to $28.58. Investors appear to have been taking profit on Friday after a very strong first session yesterday following the quick service restaurant operator's initial public offering (IPO). Excitement over its IPO led to Guzman y Gomez's shares opening 36% higher than its $22.00 listing price on Thursday. This gave the Mexican food chain a $3 billion valuation and meant that its shares were trading on a crazy multiple of 500x estimated FY 2025 earnings.

KMD Brands Ltd (ASX: KMD)

The KMD Brands share price is down 6.5% to 36.5 cents. This has been driven by the release of a disappointing trading update from the retailer this morning. KMD Brands revealed that its second half group sales were down 8.4% through to the end of May. This reflects a 5.9% decline in Rip Curl sales, an 8.4% drop in Kathmandu sales, and a 21.8% fall in Oboz sales. As a result, the company now expects underlying EBITDA to be approximately NZ$50 million for the full year. This will be down over 50% from NZ$105.9 million in FY 2023.

Mineral Resources Ltd (ASX: MIN)

The Mineral Resources share price is down 6.5% to $56.11. This follows significant weakness in the lithium industry today after the battery making ingredient continued to fall. In addition, the mining and mining services company announced plans to close its Yilgarn Hub iron ore operation this week. Management notes that having carefully considered all options, an assessment confirmed that the continuity of the Yilgarn Hub is not financially viable beyond the end of 2024. It has made the decision to cease Yilgarn Hub iron ore shipments by 31 December.

Pilbara Minerals Ltd (ASX: PLS)

The Pilbara Minerals share price is down 4% to $3.07. Investors have been selling the lithium miner's shares following the release of the pre-feasibility study (PFS) for the expansion of production at the Pilgangoora Operation. Management revealed that its PFS determined that production capacity at Pilgangoora Operation could be expanded to more than 2 million tonnes per annum (Mtpa). This would come with an estimated capital expenditure of ~$1.2 billion. And while the study has a good NPV, it is based on long-term lithium price assumptions meaningfully above current levels and Goldman Sachs' forecasts. Also, news of a potentially big increase in production is not necessarily good news when there are forecasts for a lithium surplus.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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