Mexican fast-food chain Tortilla has warned it faces a hit to margins this year after meat prices have soared.
Inflationary pressures would lead to a three percentage points reduction in gross margin for the 2022 financial year, to the tune of approximately £1.8m, Tortilla said on Monday.
The restaurant brand pointed to a 40 per cent leap in protein, which makes up one third of its cost of goods.
Tortilla’s share price nose dived following the update, plunging almost 30 per cent by the late morning.
Cost pressures were the biggest challenge across the sector, Tortilla stated on Monday, pointing to an additional £0.5m hit from increases to electricity and gas bills.
As a value-focused brand, Tortilla said it remained “cautious” about the significant menu price increases or “heavy discounting” in order to protect its offer for customers.
Despite the gloomy warning, the newly-London-listed company said it was ahead of the expansion targets it set out at its IPO, after adding 18 sites to its estate this year.
It said it would be rolling-out between 12 and15 sites per year from the 2023 financial year.
The burrito seller saw sales swell 30 per cent to £26.9m, in interim results to 3 July.
It posted a subdued £0.3m profit before tax, compared to £2.6m in the first half of 2021, cautioning that its summer trading had been “more challenging than anticipated”.
The hospitality chain blamed “a combination of train strikes, the heatwave, and pent-up consumer demand for overseas holidays” for a summer slowdown in sales.
“Times remain tough across the industry,” owing to elevated cost pressures, Richard Morris, CEO of Tortilla, stated.
However, the chain was confident in its ongoing expansion, with five additional sites planned to open in the second half of 2022.
The group dished out £2.75m to buy rival Mexican fast food chain Chilango from the investment firm RD Capital Partners in May.