Tortilla Mexican Grill is expected to increase revenue by 13.8% in FY23, against the comparable prior year period to £65.7m
The fast-casual Mexican restaurant group provided a trading update for the financial year ended 31 December 2023 with like-for-like growth of +3.7%.
The company said this performance is slightly behind previous expectations due to ”subdued consumer confidence” impacting demand across the eating out market, in particular during Q4.
However, the group’s London sites, where Tortilla enjoys stronger levels of brand awareness, shopping centres and travel locations have continued to perform particularly well, it said.
On the other hand, high streets have been impacted by lower footfall over the past few months and sales have been impacted here and in smaller tertiary cities and towns where the brand awareness is lower.
Franchise partnerships with Compass Group and SSP Group have continued to perform outstandingly well in the UK, and the group has revealed four new store openings with SSP in FY24.
FY23 delivery sales have remained stable as a proportion of revenue at approximately 31%.
Operating across multiple delivery partners, whilst supporting the sales performance, impacted margins and therefore Tortilla’s delivery strategy is now being reviewed.
The company said that it has maintained focus on cost control with the benefits of multiple initiatives - in supply chain, energy, and productivity - resulting in an improved Adjusted EBITDA margin.
It anticipates Adjusted EBITDA for FY23 will be in the range of £4.5m - £4.6m.
Tortilla opened seven new UK stores during the period, including six equity stores and one franchise.
It has also rationalised its delivery-kitchen estate by closing two units, taking the Group to 87 sites at the year end.
The group remains ahead of its aim of opening 45 new sites across the five years following its IPO in October 2021.
It strengthened its team with the appointment of Keith Down to the Board as a non-executive director as well as the promotion of Andy Naylor, CFO, to UK managing director.
It announces the appointment of Maria Denny as group finance director who has a wealth of experience in the food and retail sector and joins the business in February 2024.
Looking forward, the company expects the eating out market to continue to be challenged by cost-of-living pressures, especially outside of London and therefore looks to a higher level of marketing investment to drive brand awareness in 2024.
However, it adds that cost pressures are expected to ease over the year ahead, reflecting its favourable contracts negotiated with key suppliers during FY23, the hedging of key input and utility costs, and the full year benefit of cost control initiatives implemented during FY23.
Recent guidance on National Living Wage increases will impact staff costs from April 2024.
The group has secured an exciting pipeline of new sites in high-footfall city centre and shopping centre locations.
Tortilla continues to refine its business model, marketing approach and site opening strategy to respond to the market environment whilst also ensuring it continues to capitalise on its significant long-term growth opportunities.
Richard Morris, chief executive officer of Tortilla, said, “During 2023 Tortilla has made important strategic progress. We have continued to open new sites in line with our long-term growth strategy, increased like-for-like sales, and implemented several initiatives to enhance profitability during H2.”
“As a management team we are taking proactive actions to adapt to the changing market environment.
”We know that in buoyant eating out markets where the Tortilla brand is well known, we outperform. We have a strong portfolio of new sites in high quality locations as well as additional franchise growth opportunities.
”In addition, we intend to increase marketing investment to improve broader consumer awareness of our brand and fresh, value for money proposition whilst also taking action to optimise the profitability and long-term potential of our delivery channel.”
“We remain as confident and excited as ever about Tortilla’s long-term and sizable profitable growth opportunities both in the UK and internationally.”
