Core Viewpoint - Kura Sushi (KRUS) has received an upgrade to a Zacks Rank 2 (Buy) due to an upward trend in earnings estimates, which is a significant factor influencing stock prices [1][2]. Earnings Estimates and Stock Price Movement - The Zacks rating system is based on changes in a company's earnings picture, which is crucial for predicting near-term stock price movements [2][3]. - A strong correlation exists between earnings estimate revisions and stock price movements, with institutional investors using these estimates to determine fair value [3]. Kura Sushi's Earnings Outlook - The recent upgrade for Kura Sushi indicates an improvement in the company's underlying business, which is expected to positively influence its stock price [4]. - Over the past three months, the Zacks Consensus Estimate for Kura Sushi has increased by 3950%, indicating a significant positive revision in earnings expectations [7]. Zacks Rank System - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with a proven track record of Zacks Rank 1 stocks generating an average annual return of +25% since 1988 [6]. - Kura Sushi's upgrade to Zacks Rank 2 places it in the top 20% of Zacks-covered stocks, suggesting a strong potential for market-beating returns in the near term [9].

Group 1 - The article suggests that the current market conditions present a favorable opportunity for investment, particularly near the support zone [1] - The author references a previous article from April, indicating a consistent analysis approach [1] Group 2 - There are no specific company names or financial data provided in the content, limiting the ability to summarize further details related to companies or industries [2]

Financial Performance - Kura Sushi USA reported quarterly earnings of 5 cents per share, exceeding the analyst consensus estimate of a loss of 1 cent per share [1] - The company achieved quarterly sales of $73.965 million, surpassing the analyst consensus estimate of $71.832 million [1] - Kura Sushi raised its FY2025 sales guidance from a range of $275 million to $279 million, now set at $281 million [1] Management Commentary - Hajime Uba, President and CEO, expressed satisfaction with the third quarter's performance, highlighting the rollout of a new reservation system, exploration of new market opportunities, and development of the IP pipeline [2] - Uba emphasized the team's efforts to capitalize on the summer season and prepare for a strong fiscal 2026 [2] Stock Performance and Analyst Ratings - Following the earnings announcement, Kura Sushi shares fell by 13.2%, trading at $75.00 [2] - Roth Capital analyst George Kelly reiterated a Buy rating and raised the price target from $89 to $106 [8] - Lake Street analyst Mark Smith maintained a Buy rating and increased the price target from $62 to $98 [8] - Barclays analyst Jeffrey Bernstein kept an Equal-Weight rating and raised the price target from $71 to $75 [8]

Core Viewpoint - Kura Sushi reported quarterly earnings of $0.05 per share, exceeding the Zacks Consensus Estimate of a loss of $0.02 per share, marking a significant earnings surprise of +350.00% compared to break-even earnings per share a year ago [1] Financial Performance - The company achieved revenues of $73.97 million for the quarter ended May 2025, surpassing the Zacks Consensus Estimate by 2.22% and showing an increase from $63.08 million in the same quarter last year [2] - Over the last four quarters, Kura Sushi has exceeded consensus EPS estimates three times and has also topped consensus revenue estimates three times [2] Stock Performance and Outlook - Kura Sushi shares have declined approximately 5.2% since the beginning of the year, while the S&P 500 has gained 5.9% [3] - The company's future stock performance will largely depend on management's commentary during the earnings call and the trends in earnings estimate revisions [3][4] Earnings Estimates - The current consensus EPS estimate for the upcoming quarter is $0.18 on revenues of $77.7 million, with a breakeven estimate on revenues of $280.01 million for the current fiscal year [7] - The estimate revisions trend for Kura Sushi was mixed prior to the earnings release, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market [6] Industry Context - The Retail - Restaurants industry, to which Kura Sushi belongs, is currently ranked in the top 37% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8]

Financial Data and Key Metrics Changes - Total sales for the fiscal third quarter were $74 million, compared to $63.1 million in the prior year period, representing a growth of approximately 17.5% [15][20] - Comparable sales growth was negative 2.1%, with traffic down 2.9% and price/mix up 0.8% [8][15] - Cost of goods sold as a percentage of sales improved to 28.3% from 29.2% in the prior year quarter [9][17] - Labor costs as a percentage of sales increased to 33.1% from 32.6% in the prior year quarter due to wage inflation [17][19] - Restaurant level operating profit margin was 18.2%, down from 20% in the prior year quarter [9][19] - Adjusted EBITDA increased to $5.4 million from $4.5 million in the prior year quarter, a 20% increase [20] Business Line Data and Key Metrics Changes - The company opened three new restaurants during the third quarter and two more subsequent to the quarter end, achieving its unit development guidance of 14 new restaurants for the fiscal year [9][10] - The class of 2025 restaurants has performed well, with many exceeding expectations shortly after opening [10] Market Data and Key Metrics Changes - Comparable sales in the West Coast market were flat, while the Southwest market saw a decline of 2.5% [15][17] - The company is focusing on smaller DMAs, with successful openings in Bakersfield, California, and plans for further expansion into markets like Des Moines, Richmond, and Tulsa [11] Company Strategy and Development Direction - The company is implementing a new reservation system, which has been rolled out across all restaurants ahead of schedule, and is expected to drive operational efficiencies and improve customer experience [7][13] - There is a renewed focus on intellectual property collaborations, with seven to eight lined up for fiscal 2026, which is a record for the company [11][12] - The company aims to achieve a 50-50 split between new and existing markets by fiscal 2027, with ongoing development in previously unexplored DMAs [11] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about sequential improvement in comparable sales performance each month of the quarter [8][15] - The company is confident in achieving a 20% plus operating margin in fiscal 2026, supported by a strong pipeline of IP collaborations and the reservation system [46][47] - Management noted that labor inflation is expected to moderate in the upcoming quarter, which should help with labor cost leverage [32] Other Important Information - The company has $93 million in cash and no debt at the end of the fiscal third quarter [20] - General and administrative expenses as a percentage of sales were reduced to 11.8% from 14% in the prior year quarter, attributed to lower public company costs and operational efficiencies [18][19] Q&A Session Summary Question: Can you elaborate on the new reservation system and its impact on same-store sales? - Management noted that the reservation system rollout began in late February and showed sequential improvement in sales performance, particularly in May when the first IP campaign was introduced [25][26][29] Question: What are the expectations regarding labor costs and inflation? - The company expects mid to low single-digit labor inflation in Q4, which should improve labor cost leverage if sales are positive [31][32] Question: Can you provide insights on tariff implications and their impact on costs? - Management indicated that they do not foresee a significant impact from tariffs on food and beverage costs, and they are negotiating with suppliers to share any potential cost increases [40][41][42] Question: What is the outlook for restaurant margins moving forward? - Management acknowledged that achieving a 20% margin in fiscal 2025 is challenging but remains confident in reaching that target in fiscal 2026 due to improved sales and operational efficiencies [44][46] Question: How is the company managing general and administrative expenses? - The company is focused on maintaining tight control over hiring and operational efficiencies, which has led to a reduction in G&A expenses as a percentage of sales [79][81] Question: Can you discuss the performance of new store openings? - The class of 2025 openings has been strong, particularly in the Pacific Northwest, and management is optimistic about future openings in new markets [56][57] Question: What are the expectations for the light rice initiative? - The light rice option has been well-received in test markets, and management is confident it will drive increased sales and customer satisfaction [122][124]

[Q3 2025 Financial Highlights](index=1&type=section&id=Fiscal%20Third%20Quarter%202025%20Highlights) Kura Sushi reported total sales of $74.0 million, a significant increase from the previous year, achieved a net income of $0.6 million, and opened three new restaurants, despite a 2.1% decrease in comparable restaurant sales Q3 2025 Key Performance Indicators (vs. Q3 2024) | Metric | Q3 2025 | Q3 2024 | | :--- | :--- | :--- | | Total Sales | $74.0 million | $63.1 million | | Comparable Restaurant Sales | -2.1% | N/A | | Operating Loss | $0.2 million | $1.2 million | | Net Income (Loss) | $0.6 million | $(0.6) million | | Diluted EPS | $0.05 | $(0.05) | | Adjusted Net Income | $0.6 million | $4 thousand | | Restaurant-level Operating Profit* | $13.5 million | N/A | | Adjusted EBITDA* | $5.4 million | N/A | | New Restaurants Opened | 3 | N/A | - CEO Hajime Uba expressed satisfaction with the quarter's results, highlighting progress in the new reservation system, exploration of new market opportunities, and strategy for Bikkurapon collaborations to prepare for fiscal 2026[4](index=4&type=chunk) [Detailed Financial Analysis (Q3 2025)](index=1&type=section&id=Review%20of%20Fiscal%20Third%20Quarter%202025%20Financial%20Results) The company's total sales grew due to new restaurant openings, though comparable sales declined, while the operating loss narrowed significantly and the company swung to a net profit, with improved food and beverage expenses as a percentage of sales, but increased labor costs [Sales and Profitability](index=1&type=section&id=Sales%20and%20Profitability) Total sales increased by 17.3% to $74.0 million, primarily driven by the opening of thirteen new restaurants, partially offset by a 2.1% decrease in comparable restaurant sales, leading to a turnaround from a prior-year net loss to a net income of $0.6 million Q3 Sales and Profitability Comparison (in millions) | Metric | Q3 2025 | Q3 2024 | Change | | :--- | :--- | :--- | :--- | | Total Sales | $74.0 | $63.1 | +17.3% | | Comparable Restaurant Sales | -2.1% | N/A | N/A | | Operating Loss | $(0.2) | $(1.2) | +82.9% | | Net Income (Loss) | $0.6 | $(0.6) | Turnaround to Profit | - The **2.1% decrease** in comparable restaurant sales was composed of a **2.9% decrease** in traffic, partially offset by a **0.8% increase** from price and product mix[5](index=5&type=chunk) [Cost Structure Analysis](index=1&type=section&id=Cost%20Structure%20Analysis) Food and beverage costs improved to 28.3% of sales from 29.2% year-over-year, while labor costs rose to 33.1% of sales from 32.6%, and General and Administrative (G&A) expenses decreased to 11.8% of sales from 14.0% Cost as a Percentage of Sales | Cost Category | Q3 2025 | Q3 2024 | | :--- | :--- | :--- | | Food and Beverage | 28.3% | 29.2% | | Labor and Related | 33.1% | 32.6% | | Other Costs | 14.7% | 14.1% | | General & Administrative | 11.8% | 14.0% | - The decrease in G&A expenses as a percentage of sales was primarily due to sales leverage and a reduction in professional fees and litigation expenses[9](index=9&type=chunk) - Occupancy expenses increased in absolute terms to **$5.5 million** from **$4.3 million**, driven by the opening of thirteen new restaurants since Q3 2024[7](index=7&type=chunk) [Restaurant Development](index=2&type=section&id=Restaurant%20Development) Kura Sushi continued its expansion by opening three new restaurants during the third quarter in Arizona, Washington, and Texas, with two additional restaurants opened subsequent to the quarter's end, bringing the total to 78 locations - **Three new restaurants** were opened during Q3 2025 in: - Scottsdale, Arizona - Lynnwood, Washington - McKinney, Texas[12](index=12&type=chunk) - Subsequent to the quarter end (May 31, 2025), **two more restaurants** were opened in The Woodlands, Texas and Salt Lake City, Utah[12](index=12&type=chunk) [Fiscal Year 2025 Outlook](index=2&type=section&id=Fiscal%20Year%202025%20Outlook) The company updated its full-year guidance for fiscal 2025, projecting total sales of approximately $281 million, planning to open 15 new restaurants, and expecting general and administrative expenses to be below 13.0% of sales Updated FY 2025 Guidance | Metric | Guidance | | :--- | :--- | | Total Sales | Approx. $281 million | | New Restaurants | 15 (annual unit growth > 20%) | | Avg. Net Capex per Unit | Approx. $2.5 million | | G&A Expenses (% of Sales) | Below 13.0% (excl. legal settlements) | [Financial Statements](index=6&type=section&id=Financial%20Statements) This section provides the detailed, unaudited financial statements for the third quarter and nine months ended May 31, 2025, including the income statement, selected balance sheet and operating data, and reconciliations of GAAP to non-GAAP measures [Statements of Operations](index=6&type=section&id=Statements%20of%20Operations%20and%20Comprehensive%20Income%20(Loss)) For the three months ended May 31, 2025, the company reported sales of $74.0 million and a net income of $0.6 million, or $0.05 per diluted share, a significant improvement from the same period in 2024, which saw sales of $63.1 million and a net loss of $0.6 million Consolidated Statements of Operations (in thousands, for Three Months Ended May 31) | Account | 2025 | 2024 | | :--- | :--- | :--- | | Sales | $73,965 | $63,082 | | Total operating expenses | $74,127 | $64,251 | | **Operating loss** | **$(162)** | **$(1,169)** | | Income (loss) before income taxes | $620 | $(498) | | **Net income (loss)** | **$565** | **$(558)** | | Diluted EPS | $0.05 | $(0.05) | [Selected Balance Sheet and Operating Data](index=7&type=section&id=Selected%20Balance%20Sheet%20Data%20and%20Selected%20Operating%20Data) As of May 31, 2025, the company held $47.1 million in cash and cash equivalents and had total assets of $419.4 million, with the total number of restaurants growing to 76, while restaurant-level operating profit margin was 18.2% and Adjusted EBITDA margin slightly increased to 7.3% Selected Balance Sheet Data (in thousands) | Account | May 31, 2025 | August 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $47,132 | $50,986 | | Total assets | $419,373 | $328,522 | | Total liabilities | $192,369 | $165,984 | | Total stockholders' equity | $227,004 | $162,538 | Selected Operating Data (for Three Months Ended May 31) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Restaurants at end of period | 76 | 63 | | Comparable restaurant sales | (2.1)% | 0.6% | | Adjusted EBITDA | $5,410 | $4,451 | | Restaurant-level operating profit | $13,492 | $12,604 | | Restaurant-level operating profit margin | 18.2% | 20.0% | [Reconciliation of Non-GAAP Measures](index=8&type=section&id=Reconciliation%20of%20Non-GAAP%20Measures) The company provides reconciliations for its non-GAAP metrics, showing Adjusted Net Income of $0.6 million, Adjusted EBITDA of $5.4 million, and Restaurant-level operating profit of $13.5 million for Q3 2025 Reconciliation to Adjusted EBITDA (Q3 2025, in thousands) | Line Item | Amount | | :--- | :--- | | Net income | $565 | | Interest income, net | $(782) | | Income tax expense | $55 | | Depreciation and amortization | $3,559 | | **EBITDA** | **$3,397** | | Stock-based compensation | $1,293 | | Non-cash lease expense | $720 | | Litigation | $— | | **Adjusted EBITDA** | **$5,410** | Reconciliation to Restaurant-level Operating Profit (Q3 2025, in thousands) | Line Item | Amount | | :--- | :--- | | Operating loss | $(162) | | Add: Depreciation & amortization | $3,559 | | Add: Stock-based compensation | $1,293 | | Add: Pre-opening costs | $404 | | Add: Non-cash lease expense | $720 | | Add: General & administrative | $8,741 | | Less: Corp-level stock comp | $(1,063) | | **Restaurant-level operating profit** | **$13,492** |

Core Insights - Kura Sushi USA, Inc. reported financial results for the fiscal third quarter ended May 31, 2025, highlighting a total sales increase to $74.0 million from $63.1 million in the same quarter of 2024, despite a 2.1% decrease in comparable restaurant sales [5][10][11]. Financial Performance - Total sales reached $74.0 million, a 17.5% increase from $63.1 million in Q3 2024 [5][10]. - Comparable restaurant sales decreased by 2.1%, driven by a 2.9% decline in traffic and a 0.8% increase in price/mix [5][10]. - Net income was $0.6 million, or $0.05 per diluted share, compared to a net loss of $0.6 million, or $(0.05) per diluted share, in Q3 2024 [9][10]. - Adjusted net income was $0.6 million, or $0.05 per diluted share, compared to an adjusted net income of $4,000, or $0.00 per diluted share, in Q3 2024 [11][31]. - Restaurant-level operating profit was $13.5 million, representing 18.2% of sales, down from $12.6 million, or 20.0% of sales, in Q3 2024 [11][30]. - Adjusted EBITDA was $5.4 million, an increase from $4.5 million in Q3 2024 [11][33]. Cost Structure - Food and beverage costs as a percentage of sales decreased to 28.3% from 29.2% in Q3 2024, attributed to menu price increases and supply chain initiatives [6]. - Labor and related costs increased to 33.1% of sales from 32.6% in Q3 2024, primarily due to rising wage rates [6]. - Occupancy and related expenses rose to $5.5 million from $4.3 million in Q3 2024, mainly due to the opening of thirteen new restaurants [7]. - General and administrative expenses were $8.7 million, slightly down from $8.9 million in Q3 2024, with a decrease in percentage of sales to 11.8% from 14.0% [8]. Restaurant Development - The company opened three new restaurants during the fiscal third quarter of 2025, located in Scottsdale, Arizona; Lynnwood, Washington; and McKinney, Texas [12]. - Following the quarter, two additional restaurants were opened in The Woodlands, Texas, and Salt Lake City, Utah [12]. Fiscal Year 2025 Outlook - For the full fiscal year of 2025, the company anticipates total sales of approximately $281 million and plans to open 15 new restaurants, maintaining an annual unit growth rate above 20% [18].

Core Insights - The article emphasizes the investment philosophy focused on small cap companies, highlighting the importance of identifying mispriced securities through understanding financial drivers and utilizing DCF model valuation [1] Group 1: Investment Philosophy - The investment approach is not confined to traditional categories such as value, dividend, or growth investing, but rather considers all prospects of a stock to assess risk-to-reward [1] Group 2: Market Focus - The investment strategy encompasses markets in the US, Canada, and Europe, indicating a broad geographical focus for potential investment opportunities [1]

Group 1 - Kura Sushi USA, Inc. is set to release its third-quarter earnings results on July 8, with analysts expecting a quarterly loss of 1 cent per share and projected revenue of $71.82 million, up from $63.08 million a year earlier [1] - In the previous quarter, Kura Sushi reported a loss of 14 cents per share, which was worse than the analyst consensus estimate of a loss of 13 cents per share, and quarterly sales of $64.89 million, slightly missing the consensus estimate of $64.91 million [2] - Kura Sushi shares experienced a gain of 5.3%, closing at $86.08 on the day prior to the earnings announcement [2] Group 2 - Barclays analyst Jeffrey Bernstein maintained an Equal-Weight rating and raised the price target from $52 to $71 [5] - Citigroup analyst Jon Tower maintained a Neutral rating and reduced the price target from $71 to $47 [5] - TD Securities analyst Andrew Charles maintained a Hold rating and cut the price target from $72 to $44 [5] - Craig-Hallum analyst Jeremy Hamblin maintained a Buy rating and increased the price target from $85 to $120 [5] - Piper Sandler analyst Brian Mullan maintained a Neutral rating and raised the price target from $63 to $98 [5]

Company Overview - Kura Sushi USA, Inc. is a technology-enabled Japanese restaurant concept with 77 locations across 20 states and Washington DC [3] - The company offers a distinctive dining experience based on authentic Japanese cuisine and a revolving sushi service model [3] - Established in 2008 as a subsidiary of Kura Sushi, Inc., which has over 650 restaurants internationally and 45 years of brand history [3] Upcoming Financial Results - Kura Sushi will host a conference call to discuss fiscal third quarter 2025 financial results on July 8, 2025, at 5:00 p.m. ET [1] - A press release with the financial results will be issued on the same day after market close [1] - The conference call will be hosted by key executives including Hajime "Jimmy" Uba, Jeff Uttz, and Benjamin Porten [1]