GEN Restaurant 2025 Q1 Earnings Misses Targets with Net Loss Widening 153.1%

GEN Restaurant (GENK) reported its fiscal 2025 Q1 earnings on May 13th, 2025. GEN Restaurant's Q1 results fell short of expectations, swinging to a net loss of $1.96 million compared to a net income of $3.70 million in the previous year. The company missed its earnings targets due to higher costs associated with restaurant expansion and economic pressures. Despite the loss, GEN remains optimistic about its future expansion plans and maintains its guidance for full-year revenue between $245 million and $250 million.

Revenue

The total revenue of GEN Restaurant increased by 13.0% to $57.34 million in 2025 Q1, up from $50.76 million in 2024 Q1.

Earnings/Net Income

GEN Restaurant swung to a loss of $0.06 per share in 2025 Q1 from a profit of $0.11 per share in 2024 Q1 (154.5% negative change). Meanwhile, the company reported a net loss of $-1.96 million in 2025 Q1, reflecting a 153.1% deterioration from the net income of $3.70 million achieved in 2024 Q1. The EPS performance was disappointing due to increased expansion costs.

Price Action

The stock price of GEN Restaurant has edged down 1.37% during the latest trading day, has jumped 12.75% during the most recent full trading week, and has surged 19.86% month-to-date.

Post-Earnings Price Action Review

The strategy of buying GENK shares when revenues miss expectations and holding for 30 days has demonstrated promising results in backtests. This approach anticipates a brief downturn in the stock price followed by recovery, as evidenced by the May 13, 2025, earnings call where a decline of 0.7% in Q1 same-store sales was mentioned. With strong revenue growth of 13% year-over-year to $57.3 million for the first quarter and planned international expansion, there is a positive outlook for the company. These factors support a 30-day holding period, allowing investors to capitalize on the rebound. The company’s emphasis on strategic initiatives, including limited price increases and training enhancements, further strengthens its competitive positioning in the market. Overall, while short-term challenges remain, GEN Restaurant's growth strategy and solid fundamentals point to long-term value creation.

CEO Commentary

David Kim, Chairman and Chief Executive Officer, expressed optimism regarding GEN Restaurant's performance, noting a 13% year-over-year revenue increase to $57.3 million, driven by restaurant expansion and the strong appeal of their value-priced dining model. He acknowledged challenges from economic pressures and a modest decline in same-store sales of 0.7%, an improvement from the previous year's 5.6% decrease. Kim emphasized the importance of expanding the restaurant footprint to enhance EBITDA returns, reporting a 2.1-year payback on new stores. He highlighted strategic initiatives, including limited price increases and training enhancements, to maintain competitive positioning in the market.

Guidance

GEN Restaurant anticipates full-year revenue between $245 million and $250 million for 2025, aiming for a restaurant-level adjusted EBITDA margin of 17% to 18%. The company remains on track to open 12 to 13 new restaurants, including three international locations in South Korea, with a projected annual run rate approaching $300 million by the end of 2025.

Additional News

GEN Restaurant Group is expanding its international footprint with the planned opening of three new restaurants in South Korea. This strategic move aims to capitalize on lower construction costs and strong market potential. The company is also exploring innovative concepts, like dual-concept stores combining GEN Korean BBQ with Kan Sushi, to enhance brand strength and operational efficiency. In addition, GEN Restaurant has launched e-gift cards to bolster sales and improve customer engagement. Despite facing macroeconomic challenges, these initiatives reflect GEN's commitment to diversifying its offerings and pursuing growth opportunities beyond domestic markets. The company continues to leverage its strong free cash flow model to support expansion without incurring long-term debt.