MEX: “A Recession is an Ideal Time for Expansion”

Tortilla Mexican Grill (LON:MEX) H1 22' Interim Results

Two months ago, I shared my rudimentary notes on Tortilla Mexican Grill, an illiquid UK microcap that stands as the nation’s largest quick-serve Mexican restaurant brand. Operating more than 80 units across the country, Tortilla’s closest competitors (non of which operate more than 16 stores) are dwarfed in both size and geographic dispersion. At the time of my original memo, I had acquired an immaterial amount of stock in the company; for tracking purposes. After an ill-received interim earnings report on October 3rd, shares fell as much as 32% intraday. It is my opinion that this was an overreaction, as the negative factors discussed in the report (namely inflationary pressure and gross margin contraction) were preestablished conceivable outcomes. That’s not to say this earnings period was without its difficulties, as I shall attempt to highlight. Those looking for comprehension of the basic outline of the business can read my notes from August.