What happened

Kura Sushi (KRUS 6.67%) stock slumped on Friday, falling over 20% by 3 p.m., compared to a 0.3% decline in the S&P 500.

The drop added to recent losses for the tiny restaurant chain specialist, but shares are still up more than 150% in the past 12 months. Kura announced fiscal first-quarter results that left Wall Street wanting more.

A pair of chopsticks picks up a piece of sushi.

Image source: Getty Images.

So what

Sales at the restaurant chain, which operates 35 Japanese style locations across 10 states, were up 154% compared to a year ago when the pandemic temporarily closed most of its dining rooms.

Revenue rose 20% compared to the same period in 2019, which marked an acceleration from the previous quarter. Kura Sushi still booked a net loss, but it took another encouraging step toward profitability. "We are pleased with the solid start to our fiscal 2022," CEO Hajime Uba said in a press release.

Most investors were hoping to see higher growth from the upscale dining brand, and they were also disappointed by the company's fiscal year outlook, which remained conservative.

Now what

Kura Sushi is projecting that sales will land between $130 million and $140 million in fiscal 2022, translating into a roughly 100% increase, year over year. Annual revenue stood at $64 million in 2019 before COVID-19 began causing serious disruptions.

The chain is still aiming to open between eight and 10 new restaurants this year, leaving about nine launches over the next three quarters.

Overall, the update didn't change anything about the bullish thesis investors have had about the restaurant stock. The tiny company still appears to have a good shot at building out its brand across the country.

However, investors' appetite for growth stocks has been waning in recent weeks, and Wall Street hasn't been as quick to buy into the prospect of higher sales, especially for stocks that have soared in the past year. That fact makes Kura Sushi vulnerable to short-term swings like this, despite its positive outlook.