Kura Sushi USA(US:KRUS)2024-07-10 00:29Financial Data and Key Metrics Changes - Total sales for the fiscal third quarter were $63.1 million, compared to $49.2 million in the prior-year period, representing a comparable sales growth of 0.6% [22][61] - Net loss was $0.6 million or $0.05 per share, compared to net income of $1.7 million or $0.16 per share in the prior-year quarter [33] - Adjusted EBITDA was $4.5 million compared to $5.1 million in the prior-year quarter [34] - Restaurant-level operating profit margin was 20%, down from 23.5% in the prior-year quarter [63] Business Line Data and Key Metrics Changes - Cost of goods sold improved by 80 basis points to 29.2% due to ongoing supply chain efforts [25] - Labor costs as a percentage of sales increased from 29.2% to 32.3%, largely due to sales deleverage and wage increases [25] - Other costs rose by 190 basis points to 14.4% due to sales deleverage and general inflation [25] Market Data and Key Metrics Changes - Comparable restaurant sales performance in California was negative 3.9%, while the Southwest market was flat [61] - In March, California comps were up 14.1%, but the overall trend deteriorated significantly in April and May [41][42] Company Strategy and Development Direction - The company aims for at least 20% annual unit growth and operational excellence regardless of the macroeconomic environment [21] - Four new units were opened in the fiscal third quarter, with six more under construction, positioning for a strong start to fiscal '25 [27] - The company is focusing on cost management and operational efficiencies to maintain profitability despite sales challenges [29] Management's Comments on Operating Environment and Future Outlook - Management believes current headwinds are macro-driven and transitory, with expectations to return to positive comparable sales as the macro environment stabilizes [21][24] - The company is focused on showcasing value and improving guest experience through technology enhancements, including a new reservation system [46][59] - Management remains optimistic about the fiscal '25 pipeline and growth prospects despite current challenges [91] Other Important Information - General and administrative expenses as a percentage of sales decreased to 14% compared to 14.2% in the prior-year quarter [32] - The company has $59.4 million in cash and cash equivalents and no debt at the end of the fiscal third quarter [64] Q&A Session Summary Question: What caused the decline in comparable sales in California? - Management noted that the decline was unexpected and attributed it to macroeconomic factors and consumer sentiment [41][42] Question: How does the company plan to address the sales decline? - The company is focusing on cost management and enhancing marketing efforts to drive sales without aggressive discounting [44][45] Question: What are the expectations for fourth-quarter comps? - Management expects negative mid-single to high-single digit comps for Q4, primarily due to tougher comparisons from the previous year [43][106] Question: How is the company managing cannibalization from new store openings? - Management acknowledged that cannibalization is a factor but emphasized that it is manageable and part of their growth strategy [51][99] Question: What is the impact of the new loyalty program on customer frequency? - The loyalty program is seen as a significant opportunity to drive customer frequency, with plans to leverage data to re-engage inactive members [118]