By Kaaren Morrissey

An Aussie-born Mexican-themed fast food chain is pulling out of the United States in a spectacular turnaround on its American market ambitions.

Stock exchange-listed Guzman y Gomez made the announcement on Friday, saying its restaurants in Chicago will cease trading immediately.

The decision was made because the financial performance of the US business was not acceptable or meeting targets.

“I have always been confident in the differentiation of our food and guest experience, however this was not translating to an improvement in sales momentum,” founder and co-chief executive Steven Marks said.

Guzman’s US experiment lasted about six years, after it opened its first store in Chicago in January 2020.

“I realised this was going to take significantly more time and capital than we had expected,” Mr Marks said.

“The board and I have concluded that the business was unlikely to deliver the performance that would justify continued investment of shareholder capital.”

In February, Guzman reported a bottom-line net profit of $10.6 million, up almost 45 per cent, on revenue of $261.2 million, for the first half of its financial year.

However, total cash earnings came in at $33 million, missing market forecasts of between $34.9 million and $35.9 million.

Weighing on the result was an $8.3 million slump in the equivalent line item for its US business, as new restaurants dragged on margins, despite global network sales swelling 18 per cent to $681.8 million.

Its core Australian business generated network sales of $673.6 million and earnings of $41.2 million.

Guzman on Friday reiterated that its Australian operation was still growing strongly.

“We have a long runway ahead of us in Australia, as we progress to our long-term target of 1000 restaurants,” Mr Marks said.

Guzman still has operations in Singapore and Japan, under a master franchise arrangement.

“We are very proud of our international partners in Singapore and Japan and see substantial growth ahead in each market,” Mr Marks said.

“Today’s decision is about the US specifically – it is not a statement about GYG’s global potential.”

The US exit is expected to weigh on its full-year profit and loss line, with a one-off charge of between $US30 million and $US40 million.

On Thursday, RBC Capital Markets analyst Michael Toner upgraded Guzman’s stock to “outperform” with a price target of $22, on the strength of its Australian business and expansion opportunities beyond 1000 stores.

Its shares ended on Thursday at $18, giving it a market value of $1.8 billion.