Tortilla Mexican Grill Eyes European Expansion
Posted by Emily on 5th Oct 2023
Britain's leading Mexican restaurant chain, Tortilla Mexican Grill, is setting its sights on European expansion while continuing to amplify its presence domestically. The chain, which went public with shares initially priced at 181p, is now surpassing its ambitious goal of doubling its UK size within five years, aiming to add 45 sites.
This growth has been evident in its year-on-year revenues, which surged by 22%, reaching £32.7m. Despite its impressive growth, the restaurant chain recently reported a dip in pre-tax earnings. Factors such as inflation, railway strikes, and notably subpar summer weather affected its performance, leading to a loss of £600,000 — a shift from the £300,000 profit it made the previous year.
Richard Morris, the Chief Executive, commented on the results, highlighting the chain's resilience in the face of economic challenges. He noted strong revenue growth and decreasing cost pressures. However, the market responded with apprehension to the unexpected doubling of pre-tax losses, causing a decline in share price by 7.9% to 64p.
Further dissecting the financial figures, in the 26 weeks leading up to July 2, like-for-like sales experienced a 5% increase. Meanwhile, adjusted underlying earnings dipped from £2.5 million to £1.8 million.
Recently, Tortilla marked its territory in Northern Ireland by opening a store in the heart of Belfast. Plans are underway to establish more sites on both sides of the Irish border. Morris shared his enthusiasm about the Belfast venture, revealing it has "exceeded even our best expectations".
The story of Tortilla traces back to 2007, initiated by Californian Brandon Stephens. Arriving in London, Stephens struggled to find the top-tier burritos and tacos he cherished back home. This led him to introduce a Californian-influenced Mexican dining experience in the UK.
Presently, Tortilla boasts 69 managed sites across the UK. Additionally, the brand has franchise agreements with SSP and Compass catering groups, operating five sites each. Further afield, there are eight Tortilla franchises in the Middle East.
Sharing on the prospective European expansion, Morris stated that it has been a point of discussion since the company's public debut. He acknowledged the challenges faced by other British eateries in Europe, emphasising a cautious approach. He hinted, "I think we're relatively close to making some kind of announcement."
In terms of financial performance, increased administrative costs have outpaced Tortilla's revenue growth. For the half-year ending July 2, the chain reported a pre-tax loss of £615,107, a stark contrast to the £264,052 profit of the previous year. Administrative expenses rose by 25% to £25.0 million.
Despite these figures, the company remains optimistic about the future. CEO Richard Morris emphasised the positive reception of the recently launched "Tortilla Sunsets" initiative. He sees vast potential in enhancing evening sales by introducing a value-packed dining experience, complete with beers, margarita cocktails priced at just £2.50, and exciting new menu items.
On a closing note, Tortilla Mexican Grill's shares experienced a slight drop, trading 0.7% lower at 69.00 pence in London on Tuesday morning.
Sources:
- Tortilla Mexican Grill has appetite for expansion
- Tortilla Mexican Grill: Revenues surge by over a fifth after expansion
- Tortilla weathers strikes and inflation as expansion drives 22 per cent revenue spike
- Tortilla Mexican Grill swings to loss as admin costs outpace revenue
Image Source: https://www.tortilla.co.uk/