Sushi restaurant chain Kura Sushi (NASDAQ:KRUS) reported revenue ahead of Wall Street’s expectations in Q4 CY2024, with sales up 25.2% year on year to $64.46 million. On the other hand, the company’s full-year revenue guidance of $277 million at the midpoint came in 0.9% below analysts’ estimates. Its GAAP loss of $0.08 per share was 61.2% above analysts’ consensus estimates.
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Kura Sushi (KRUS) Q4 CY2024 Highlights:
- Revenue: $64.46 million vs analyst estimates of $61.72 million (25.2% year-on-year growth, 4.4% beat)
- Adjusted EPS: -$0.08 vs analyst estimates of -$0.21 ($0.13 beat)
- Adjusted EBITDA: $3.57 million vs analyst estimates of $2.47 million (5.5% margin, beat)
- The company reconfirmed its revenue guidance for the full year of $277 million at the midpoint
- Operating Margin: -2.3%, up from -5.5% in the same quarter last year
- Locations: 70 at quarter end, up from 54 in the same quarter last year
- Same-Store Sales rose 1.8% year on year (3.8% in the same quarter last year)
- Market Capitalization: $1.23 billion
Hajime Uba, President and Chief Executive Officer of Kura Sushi, stated, “Our fiscal year is off to an excellent start, and we’re very encouraged to see that our comps have returned to positive territory. Our new openings are exceeding expectations and have us even more excited about Kura’s ultimate opportunity in the U.S. Adjusted EBITDA margins have achieved an all-time high for a fiscal first quarter, thanks to companywide efforts to control costs. We’re off to a great start, and I’m extremely excited for another banner year at Kura Sushi.”
Company Overview
Known for its conveyor belt that transports dishes to diners, Kura Sushi (NASDAQ:KRUS) is a chain of sushi restaurants serving traditional Japanese fare with a touch of modernity and technology.
Sit-Down Dining
Sit-down restaurants offer a complete dining experience with table service. These establishments span various cuisines and are renowned for their warm hospitality and welcoming ambiance, making them perfect for family gatherings, special occasions, or simply unwinding. Their extensive menus range from appetizers to indulgent desserts and wines and cocktails. This space is extremely fragmented and competition includes everything from publicly-traded companies owning multiple chains to single-location mom-and-pop restaurants.
Sales Growth
Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul.
Kura Sushi is a small restaurant chain, which sometimes brings disadvantages compared to larger competitors benefiting from better brand awareness and economies of scale. On the other hand, it can grow faster because it’s working from a smaller revenue base and has more white space to build new restaurants.
As you can see below, Kura Sushi grew its sales at an incredible 29.7% compounded annual growth rate over the last five years (we compare to 2019 to normalize for COVID-19 impacts) as it opened new restaurants and increased sales at existing, established dining locations.
This quarter, Kura Sushi reported robust year-on-year revenue growth of 25.2%, and its $64.46 million of revenue topped Wall Street estimates by 4.4%.
Looking ahead, sell-side analysts expect revenue to grow 16.2% over the next 12 months, a deceleration versus the last five years. Still, this projection is noteworthy and indicates the market is baking in success for its offerings.
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Restaurant Performance
Number of Restaurants
A restaurant chain’s total number of dining locations influences how much it can sell and how quickly revenue can grow.
Kura Sushi sported 70 locations in the latest quarter. Over the last two years, it has opened new restaurants at a rapid clip by averaging 28.6% annual growth, among the fastest in the restaurant sector. This gives it a chance to scale into a mid-sized business over time.
When a chain opens new restaurants, it usually means it’s investing for growth because there’s healthy demand for its meals and there are markets where its concepts have few or no locations.
Same-Store Sales
The change in a company's restaurant base only tells one side of the story. The other is the performance of its existing locations, which informs management teams whether they should expand or downsize their physical footprints. Same-store sales provides a deeper understanding of this issue because it measures organic growth at restaurants open for at least a year.
Kura Sushi has been one of the most successful restaurant chains over the last two years thanks to skyrocketing demand within its existing dining locations. On average, the company has posted exceptional year-on-year same-store sales growth of 5%. This performance along with its meaningful buildout of new restaurants suggest it’s playing some aggressive offense.
In the latest quarter, Kura Sushi’s same-store sales rose 1.8% year on year. This was a meaningful deceleration from its historical levels. We’ll be watching closely to see if Kura Sushi can reaccelerate growth.
Key Takeaways from Kura Sushi’s Q4 Results
We were impressed by how significantly Kura Sushi blew past analysts’ EPS expectations this quarter. We were also excited its EBITDA outperformed Wall Street’s estimates. Its full-year revenue guidance was maintained despite the beat. Zooming out, we think this was a solid quarter. The stock traded up 7.8% to $109.96 immediately following the results.
Sure, Kura Sushi had a solid quarter, but if we look at the bigger picture, is this stock a buy? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.
