Shares of Kura Sushi (KRUS +2.60%) were pulling back this week as the restaurant chain known for its revolving sushi bars missed the mark in its fourth-quarter earnings report.
As a result, the stock was down 14.5% for the week as of 2:45 p.m. ET, according to data from S&P Global Market Intelligence.
Image source: Getty Images.
Good results but not good enough
Like other restaurant chains, Kura seems to be experiencing a roll-off of the tailwinds from the post-pandemic reopening boom. Comparable-sales growth in the quarter was solid at 6.5% with most of the growth coming from traffic, but that represented a deceleration from earlier quarters as management said that comparisons had gotten more difficult.
Overall revenue rose 30.7% to $54.9 million, but that missed estimates at $55.8 million. Kura did see expanding restaurant-level operating margins, which rose 70 basis points to 24.4% as it benefited from lower food and beverage costs.
The company also opened up four new restaurants in the quarter, bringing its total to 50, and average-unit volumes rose from $3.8 million to $4.3 million, showing the company gaining leverage on its locations and driving increased traffic.
On the bottom line, adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) rose from $4.8 million to $6.3 million, and generally accepted accounting principles (GAAP) earnings per share rose from $0.19 to $0.25, ahead of the consensus at $0.24.
CEO Hajime Uba called it "another record-breaking year" and added, "Over the course of fiscal 2023, we achieved our three major goals by opening a record ten new units, improving our restaurant-level operating profit margins by 70 basis points, and leveraging our general and administrative expenses by 80 basis points."
NASDAQ: KRUS
Key Data Points
Where does the growth story go from here?
Looking ahead, the company forecast revenue of $238 million to $243 million, calling for a 28.3% increase at the midpoint. However, that was slightly below the consensus at $243.2 million.
Additionally, it expects to open 11 to 13 new restaurants, up from 10 in 2023, growing its store base by 24%. It also forecast general and administrative expenses to be 14.5% of revenue, down from 15% in 2023.
While the results might have come up short of estimates, they show the company delivering steady growth, and its average-unit volumes and restaurant-level operating margins are among the best in the fast-casual sector, especially considering the early stage of the business.
The stock is pricey, but Kura still has a lot of potential to ramp up profits.
