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Kura Sushi: Fiscal Q4 Earnings Snapshot

AInvestWednesday, Nov 6, 2024 5:56 pm ET
2min read
Kura Sushi USA, Inc. (KRUS) recently reported its fiscal fourth quarter and fiscal year 2024 financial results, offering insights into the company's performance and strategic initiatives. Despite a decrease in comparable restaurant sales, Kura Sushi maintained its best-in-class restaurant-level operating profit margins, demonstrating its adaptability and focus on profitability.

**Key Financial Highlights**

In the fiscal fourth quarter of 2024, Kura Sushi reported total sales of $66.0 million, a 20.3% increase compared to the same period in 2023. However, comparable restaurant sales decreased by 3.1% year-over-year. The company's operating loss was $5.8 million, compared to operating income of $2.2 million in the fourth quarter of 2023. Net loss was $5.2 million, or $(0.46) per diluted share, compared to net income of $2.9 million, or $0.25 per diluted share, in the fourth quarter of 2023.

For the full fiscal year 2024, Kura Sushi's total sales were $237.9 million, an increase of 27.1% compared to 2023. Comparable restaurant sales increased by 0.7% year-over-year. The company's operating loss was $11.5 million, compared to operating income of $0.3 million in 2023. Net loss was $8.8 million, or $(0.79) per diluted share, compared to net income of $1.5 million, or $0.14 per diluted share, in 2023.


**Factors Contributing to Comparable Restaurant Sales Decrease**

The 3.1% decrease in comparable restaurant sales in Q4 2024 can be attributed to several factors. Firstly, a 3.1% increase in menu prices may have deterred some price-sensitive customers. Additionally, sales deleverage due to increased wage rates contributed to the decline. The opening of fourteen new restaurants since Q4 2023 also led to higher occupancy and related expenses, which may have impacted sales. Lastly, general inflationary pressures on advertising costs, restaurant supplies, repairs, and maintenance costs, as well as increases in litigation costs, compensation-related costs, and professional fees, contributed to the decrease in comparable restaurant sales.

**Maintaining Best-in-Class Restaurant-Level Operating Profit Margins**

Kura Sushi has implemented several strategies to maintain its best-in-class restaurant-level operating profit margins despite the decrease in comparable restaurant sales. The company has increased menu prices and implemented supply chain initiatives to decrease food and beverage costs as a percentage of sales, from 29.5% in Q4 2023 to 28.5% in Q4 2024. Additionally, Kura Sushi has leveraged its general and administrative expenses by 80 basis points, demonstrating its ability to control costs. The company's focus on traffic growth, with 5.6% of its comparable sales growth driven by increased guest traffic, has also contributed to its strong performance. By opening four new restaurants during the quarter, Kura Sushi has expanded its reach and increased its revenue streams. These strategies have enabled Kura Sushi to maintain its restaurant-level operating profit margins at 24.4% of sales in Q4 2024, compared to 23.9% in Q4 2023.


**Unit Growth and Average Unit Volumes**

Kura Sushi's unit growth and average unit volumes have shown steady progress over the past two fiscal years. In fiscal 2023, the company opened a record ten new units, achieving a 20% unit growth rate. This expansion was accompanied by a 9.5% increase in comparable restaurant sales and a 12.5% increase in average unit volumes (AUVs) compared to fiscal 2022. The company's focus on unit growth and increased AUVs has translated into a 33.6% increase in total sales, from $141.1 million in 2022 to $187.4 million in 2023. Despite the increased sales, Kura Sushi's operating income was relatively flat, indicating a need for improved profitability per unit.

In conclusion, Kura Sushi's fiscal fourth quarter and fiscal year 2024 financial results highlight the company's adaptability and focus on profitability. Despite a decrease in comparable restaurant sales, Kura Sushi maintained its best-in-class restaurant-level operating profit margins through strategic initiatives and cost control measures. As the company continues to expand its reach and optimize its operations, investors should monitor its progress and consider its potential for long-term growth and income generation.
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