Kura Sushi USA(KRUS)2025-01-08 02:00Financial Data and Key Metrics - Total sales for Q1 2025 were 1.5 million compared to 2.8 million in the prior year quarter, driven by G&A leverage [24] Business Line Data and Key Metrics - Six new units were opened in Q1 2025, with six more under construction [11] - The company expects to open 14 units in fiscal 2025, maintaining an annual unit growth rate above 20% [26] - The new reservation and self-seating system is progressing as scheduled, with the first test expected in February [15][16] - The company is rolling out an updated Mister Fresh 3.0 system, which is expected to improve guest experience and reduce labor costs [16][148] Market Data and Key Metrics - Comparable sales growth was positive 1.8%, with regional comps of positive 7.8% and negative 2.3% in the Southwest market [22] - The company is focusing on smaller DMAs (Designated Market Areas) for new openings, with Bakersfield, California, being a critical test market [13][14] - The company aims to return to a 50/50 pipeline split between new and existing markets to manage comp headwinds [14] Company Strategy and Industry Competition - The company is focusing on cost control and profitability, especially in Q2, which lacks IP collaborations [39][41] - The company is shifting its marketing strategy to focus more on food-focused campaigns rather than IP collaborations [17][90] - The company is leveraging technology to improve operational efficiency, including the rollout of a new reservation system and updated ordering patterns [15][16] Management Commentary on Operating Environment and Future Outlook - Management is optimistic about the company's ability to manage comp headwinds and maintain profitability despite wage inflation and other cost pressures [10][39] - The company expects labor costs as a percentage of sales to improve in the back half of the year due to operational streamlining and seasonality [56][59] - Management is confident in the long-term potential of smaller DMAs and the ability to manage comp headwinds through strategic market expansion [14] Other Important Information - The company has 107.7 million in cash and cash equivalents with no debt, following a follow-on offering in November [25] - The company expects total sales for fiscal 2025 to be between 279 million [26] - The company is focusing on improving guest experience through technological initiatives, including the rollout of a new reservation system and updated Mister Fresh 3.0 [15][16] Q&A Summary Question: Trends in comps and mix improvement - The improvement in Q1 comps was driven by successful IP collaborations with One Piece and Pikmin, as well as food-focused marketing efforts like the "Perfect Pair" campaign [33][34] - The company expects Q2 to be more challenging due to the absence of IP collaborations, but remains focused on cost control and profitability [39][41] Question: Impact of calendar shift on holiday sales - The late Thanksgiving in November has led the company to treat December and January as a combined month for sales analysis [45] Question: Outlook for comps and profitability in fiscal 2025 - The company expects Q2 comps to potentially revert to modest negative due to the absence of IP collaborations, but anticipates positive comps in the back half of the year [51][52] Question: Labor and food inflation trends - Labor costs as a percentage of sales are expected to improve in the back half of the year due to operational streamlining and seasonality [56][59] - Food inflation was flat in Q1, and the company expects COGS as a percentage of sales to remain stable or improve slightly for the remainder of the year [61][63] Question: Impact of new reservation and self-seating system - The new reservation system is expected to reduce labor costs by eliminating the need for a dedicated host position and improving guest satisfaction [16][171] - The system is expected to drive comp growth by reducing waitlist abandonment and increasing traffic during shoulder periods [160][161] Question: Development strategy in smaller DMAs - The company is focusing on cash-on-cash returns rather than target AUVs when selecting sites in smaller DMAs [101] Question: Sustainability of mix improvement - The company believes that the days of negative high single-digit mix are behind them, thanks to food-focused marketing efforts and menu price increases on side items [108][112] Question: Delivery business and its impact - Delivery is considered incremental to sales, but the company prioritizes in-restaurant guests due to high traffic volumes [114][115] Question: G&A leverage and preopening expenses - G&A leverage improved in Q1, and the company expects further improvements if sales trends continue to pick up [121][122] - Preopening expenses were lower due to fewer units under construction and a shift in the opening team structure [124][125] Question: Promotions to drive mix and traffic - The company is focusing on promotions like the "Perfect Pair" campaign to drive mix and check growth [130][135] Question: New Mister Fresh Dome and its impact - The new Mister Fresh Dome is expected to improve guest experience and reduce server time spent explaining the system [148][151] Question: Reservation system rollout timeline - The company aims for a full system-wide rollout of the reservation system by the end of fiscal 2025 [167][168] Question: Labor efficiency improvements - The company has reduced staffing needs by about two people per shift in both front and back of house compared to pre-pandemic levels [176] Question: IP partnerships in the back half of fiscal 2025 - The company has two strong IP partnerships lined up for the back half of the year [179]