Kura Sushi USA (KRUS) 6 Nov 24 2024 Q4 Earnings call transcript

In the latest earnings call, Kura Sushi USA, Inc. provided an update on their financial performance for the fourth quarter of 2024 and shared insights into their outlook for the new fiscal year. The call, led by CEO Hajime Uba, CFO Jeff Uttz, and SVP of Investor Relations and System Development, Benjamin Porten, revealed several key themes and trends that are worth examining.

Performance Overview

The company reported a strong end to the fiscal year, with sales performance exceeding expectations despite facing sales pressures in the second half. This was reflected in a 0.7% positive full-year comp, showcasing the resilience of Kura Sushi's business model. The company opened 14 new units in the fiscal year, with a further 6 units under construction.

Cost Control and Efficiency

Cost control was a significant focus for Kura Sushi in the face of macroeconomic challenges. They reported a 100 basis point improvement in cost of goods sold, achieved through the improvement of ingredient quality and cost reduction efforts. However, labor costs increased by 230 basis points due to wage inflation and sales deleverage.

Strategic Expansion

Kura Sushi's expansion strategy was highlighted, with a particular emphasis on the Pacific Northwest market, which has shown strong performance with the opening of two successful units in Beaverton and Tacoma. The company is optimistic about the long-term potential of this market, indicating a strategic focus on expanding in untapped markets beyond the largest DMAs.

Digital Initiatives and Efficiency

The company has also been implementing digital initiatives, such as the rollout of back-of-house streamlining efforts and the porting of Kura Japan's reservation and self-seating system. These efforts are expected to deliver labor cost improvements and enhance operational efficiencies.

Future Outlook

Looking ahead, Kura Sushi is anticipating a strong start to fiscal year 2025, with total sales expected to be between $275 million and $279 million. The company plans to open 14 units, maintaining an annual unit growth rate above 20%. The focus on strategic site selection and operational streamlining is expected to contribute to improved performance in the new fiscal year.

Investor Questions and Answers

During the Q&A session, investors raised questions about revenue guidance, digital initiatives, development, and commodity inflation. The company provided detailed responses, offering insights into their strategic approach to unit openings, cost control efforts, and commodity management.

Overall, the earnings call provided a comprehensive update on Kura Sushi USA, Inc.'s financial performance and strategic outlook. The company's focus on cost control, efficiency, and strategic expansion, particularly in the Pacific Northwest market, highlights its resilience and adaptability in the face of macroeconomic challenges. The successful rollout of digital initiatives and the positive start to fiscal year 2025 suggest a strong foundation for continued growth and success.