Guzman Y Gomez Ltd (ASX: GYG) shares are on the move on Thursday.
In morning trade, the burrito seller's shares jumped 26% to $34.06.
They have since pulled back but remain up 5.5% to $28.50 at the time of writing.
Image source: Getty Images
Why are Guzman Y Gomez shares jumping?
The catalyst for today's gain has been the release of an announcement this morning which has gone down well with investors. And perhaps less so with the short sellers targeting the company.
According to the release, the company has delivered strong global network sales growth at the start of FY 2026. Management notes that this "was supported by continued operational excellence in restaurant."
Global network sales grew 18.6% on the prior corresponding period to $330.6 million. This reflects a 17.4% increase in Australia sales to $305.5 million, a 29.2% lift in Asia sales to $20.8 million, and a 65% jump in US sales to $4.3 million.
Supporting this growth was its store expansion. During the quarter, five new restaurants were opened globally, including three in Australia, one in Singapore, and one in the US. There were no restaurant closures during the period. This means there are now 261 stores globally, which is up 15.5% from 226 a year ago.
In addition, management reported that comparable sales grew 4% in Australia and 6.7% in the US. This means that each existing store is pulling in more sales than it did a year ago. Though, it is unclear if this is driven by price increases or higher traffic volumes.
Outlook
Guzman Y Gomez advised that it expects sales momentum to improve from the levels achieved in the first quarter of FY 2026. This is expected to underpin strong sales growth in FY 2026 through menu innovation, daypart expansion, operational excellence, marketing and digital initiatives.
In particular, it notes that the launch of the new Caesar menu items has performed well to date and has contributed to an improvement in comparable sales growth post quarter end.
As a result, it has reaffirmed its FY 2026 guidance for an Australia Segment underlying EBITDA margin of 5.9% to 6.3% in FY 2026. This will be up from 5.7% in FY 2025.
It also expects to achieve its store openings guidance for the year with 32 new restaurants in Australia. This will comprise 20 franchised restaurants and 12 corporate restaurants.
Buyback
Despite trading at 130x estimated FY 2026 earnings, Guzman Y Gomez has decided to buy back shares on-market.
It has announced an on-market share buyback of up to $100 million, expected to commence in the second quarter of FY 2026. It explains:
The buyback reflects the Company's robust balance sheet and cash generation, while preserving capacity to fund the ongoing expansion of the restaurant network. In light of this strong financial position, the Board has determined that an on-market share buyback of up to $100 million represents an efficient use of capital and is in the best interests of shareholders. The buyback provides the opportunity to enhance shareholder returns, while maintaining capacity to fund GYG's significant growth ambitions.
