Shares of sushi restaurant chain Kura Sushi (KRUS 4.25%) dropped on Thursday after it reported financial results for its fiscal fourth quarter of 2023. The company delivered results inside of its guidance but slightly lower than Wall Street's expectations. As of 12:15 a.m. ET, Kura Sushi stock was down about 10%.

When good isn't good enough for the market

Kura Sushi stock dropped 12% over the last year and has underperformed the S&P 500. But it's not for lack of growth. The company's fiscal 2023 sales were up nearly 33% compared to fiscal 2022. Opening new restaurant locations provided the majority of the growth. But its same-store sales were up a robust 9.5% as well.

Kura Sushi's management had guided for full-year sales of $187 million to $189 million.Therefore, its 2023 sales of $187.4 million were inline. However, it seems that the market expected a little more. And the market might also be concerned about the implications of the company's guidance.

Is the market overreacting?

Kura Sushi is a very small restaurant chain of only 50 locations at the end of its fiscal 2023. In fiscal 2024, it expects to add between 11 and 13 new locations, which would be tremendous 22% to 26% unit growth. Given its average unit volumes (sales per location annually) are almost $4.3 million, one would expect these new locations to add about $50 million to the top line.

In fiscal 2024, Kura Sushi expects to have sales of $238 million to $243 million, which is about $55 million higher than sales in fiscal 2023. Therefore, this guidance could imply that growth will come almost entirely from new locations and that same-store-sales growth will be tepid for existing locations.

However, while some investors may be concerned, this is rushing to conclusions. The contribution from new Kura Sushi locations will largely depend on timing. Therefore, it's quite possible that same-store-sales growth will stay strong and keep the company on a profitable foundation.

I believe the market is overreacting with Kura Sushi stock today. The company still looks poised for good, profitable growth over the long term.