Tortilla Mexican Grill has revealed that increasing protein costs caused by Russia’s full-scale invasion of Ukraine have significantly impacted earnings.
Even though business remained relatively robust, the fast-food chain’s profits fell by around 93% to just £156,500 in the 26 weeks leading up to early July, compared to £2.29 million in the same period of the previous year.
The absence of Covid-related restrictions on non-essential shops, the inclusion of new sites, and considerable underlying sales growth led to a 30 percent increase in revenue to £26.9 million.
However, the London-based company reported a decline in gross margins, principally due to the March expiration of the temporarily lower VAT rate on supplies to hospitality venues.
It also cited the rising proportion of in-store orders, whose prices are roughly 20 to 35 percent less than customer deliveries, and rising protein costs due to the Ukraine conflict.
Tortilla warned that its protein prices, which account for almost one-third of its total expenses, will climb by approximately 40 percent this year, while power rates are expected to rise by £500,000.
The business expects inflationary pressures to have a £1.8 million impact on full-year gross margins, although claiming to have taken steps to limit cost increases.
Richard Morris, the company’s chief executive, commented, “Industry-wide, recent cost pressures have exacerbated an already difficult environment.”
Following this statement, Tortilla Mexican Grill shares fell by more than a quarter to £1.04 in early trade, representing a 43 percent decline in value since its initial public offering one year ago.
The supplier of Mexican cuisine has utilized a portion of the funds from its initial public offering to extend its estate from 62 locations in September 2021 to 84 locations in the United Kingdom, the Republic of Ireland, and the Middle East.
Many of the new locations belong to erstwhile competitor Chilango, which the company purchased for $2.75 million in May. Others are franchises owned by catering behemoth Compass Group and Upper Crust owner SSP Group.
Tortilla stated that it aims to open 12 to 15 additional sites beginning the next year to capitalize on the ‘depressed’ commercial property market and its robust trading outside of London.
However, the AIM-listed company also reported that sales in ‘Zone 1’ destinations were only marginally below pre-pandemic levels.
Richard Morris stated, “Against a backdrop of adverse macroeconomic conditions, I am extremely pleased to inform you that we have continued to make significant strides toward our ambitious growth goals outlined in our IPO last year.
Our robust top-line growth greatly outpaced the entire market, once again showing Tortilla’s rising reputation for affordable, high-quality food.
