• Total Sales: $66 million for the fiscal fourth quarter.
• Comparable Sales Performance: Negative 3.1% for the fourth quarter.
• Restaurant Level Operating Margin: 20.9% for the fourth quarter.
• Cost of Goods Sold: 28.5% of sales, a 100 basis point improvement over the prior year.
• Labor Costs: 31.1% of sales, an increase of 230 basis points from the prior year.
• Operating Loss: $5.8 million compared to operating income of $2.2 million in the prior year quarter.
• Net Loss: $5.2 million or negative 46 per share.
• Adjusted Net Income: $1 million or 9 per share.
• Adjusted EBITDA: $5.5 million compared to $6.3 million in the prior year quarter.
• Cash and Cash Equivalents: $51 million with no debt at the end of the fiscal fourth quarter.
• New Unit Openings: 14 new units opened during the fiscal year, with 5 additional units opened subsequent to quarter end.
• Impairment Charge: $1.6 million due to a changing sales environment at the Aventura, Florida location.

• Warning! GuruFocus has detected 2 Warning Signs with KRUS.

Release Date: November 06, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Kura Sushi USA Inc (NASDAQ:KRUS) reported total sales of $66 million for the fiscal fourth quarter, showing a significant increase from $54.9 million in the prior year period.
• The company maintained a positive full-year comparable sales growth of 0.7% despite challenges, with restaurant-level operating margins above 20%.
• Kura Sushi USA Inc (NASDAQ:KRUS) successfully opened 14 new units during the fiscal year and has plans to open 14 more in fiscal year 2025, maintaining an annual unit growth rate above 20%.
• The company improved its cost of goods sold as a percentage of sales to 28.5%, a 100 basis point improvement over the prior year, by enhancing ingredient quality while reducing costs.
• Kura Sushi USA Inc (NASDAQ:KRUS) has no debt and holds $51 million in cash and cash equivalents, providing a strong liquidity position.

Negative Points

• Comparable restaurant sales performance for the fourth quarter was negative 3.1%, with significant regional disparities, including a negative 8.9% in the Southwest market.
• Labor costs as a percentage of sales increased to 31.1% from 28.8% in the prior year quarter, driven by wage inflation and sales deleverage.
• The company reported an operating loss of $5.8 million compared to an operating income of $2.2 million in the prior year quarter, largely due to litigation expenses and higher labor costs.
• Kura Sushi USA Inc (NASDAQ:KRUS) took an impairment charge of $1.6 million due to a changing sales environment at its Florida location.
• General and administrative expenses as a percentage of sales increased to 20.3% from 13.2% in the prior year quarter, primarily due to litigation expenses.

Q & A Highlights

Q: Can you explain the revenue guidance for fiscal year 2025, considering the new store openings and current sales trends? A: Hajime (Jimmy) Uba, President and CEO, explained that the company is being conservative with revenue guidance despite a strong start to the fiscal year. They are cautious due to the ongoing recovery process and want to avoid repeating a downward revenue guidance as seen last year. The macro environment remains unpredictable, and the guidance reflects prudence in this context.

Q: How are the new store openings expected to impact growth, and are there any changes in store size or format? A: Benjamin Porten, SVP of Investor Relations, stated that the company focuses on cash-on-cash return rather than a specific store size or format. They are open to building smaller stores if they offer high returns. The company does not provide specific comp guidance but indicates that the assumption for fiscal 2025 is not negative.

Q: What are the expectations for labor costs as sales volumes return, and will the operational changes remain effective? A: Benjamin Porten confirmed that the operational streamlining changes are structural and will not require additional labor as sales increase. The company expects labor costs as a percentage of sales to improve in fiscal 2025 compared to fiscal 2024, with further upside if the macro environment recovers.

Q: Can you provide insights into the development pipeline and any challenges in site selection or permitting? A: Benjamin Porten explained that there are no significant issues with permitting or construction. The company has pruned some sites from the pipeline to minimize cannibalization and focus on strategic site selection. The current pipeline reflects these strategic changes, and the company is confident in its development plans.

Q: How is the company managing commodity inflation, and what flexibility do you have in adjusting the menu? A: The company anticipates low single-digit commodity inflation for fiscal 2025, comparable to CPI increases. They have a diversified commodity basket and can pivot quickly to alternative menu items if needed. The company also benefits from redundancy in its supply chain, minimizing the risk of running out of products.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.