Kura Sushi USA(KRUS) - 2026 FY - Earnings Call Transcript

Financial Data and Key Metrics Changes - Kura Sushi reported a strong performance in November and December, with traffic and ticket-driven growth leading to better-than-expected comparable sales [5][6] - The company is guiding for an 18% restaurant-level margin for fiscal 2026, with expectations to improve to around 20% in fiscal 2027 [12][13] - Cost of goods sold (COGS) is expected to be approximately 30% for the year, influenced by tariffs and a 3.5% price increase implemented on November 1st [12][15] Business Line Data and Key Metrics Changes - The company is experiencing a 20% annual growth rate in unit openings, aiming for over 300 locations in the U.S. [3] - The class of 2025 openings is outperforming previous classes by at least 10%, attributed to improved site selection and landlord relationships [18][19] Market Data and Key Metrics Changes - Kura Sushi's competitive advantage is highlighted by its ability to attract customers from local mom-and-pop sushi restaurants, especially as these competitors struggle with pricing [7][8] - The company has a robust balance sheet with over $76 million in cash and investments, providing liquidity and optionality for future growth [26] Company Strategy and Development Direction - Kura Sushi is focused on expanding its footprint while enhancing guest experience through automation and technology, such as the introduction of robotic dishwashers [41][44] - The company is leveraging IP partnerships to drive brand awareness and customer engagement, with a strong pipeline of collaborations expected to enhance performance [27][28] Management's Comments on Operating Environment and Future Outlook - Management noted that the macroeconomic environment has improved, contributing to better performance in late 2025 [6] - The company anticipates that the current pricing dynamics will continue to benefit its market position, regardless of tariff conditions [9] Other Important Information - The company has implemented a reservation system that has significantly increased engagement among rewards program members, with plans to introduce tiered statuses to enhance the program [30][33] - Kura Sushi is actively working on marketing strategies to attract new customers, focusing on experiential marketing to convey the value of its offerings [35] Q&A Session Summary Question: What drove the acceleration in November and December? - Management attributed the acceleration to a better macro setup and successful marketing campaigns, including an LTO and IP campaign [6][7] Question: How does the company plan to achieve the 18% margin guidance? - The company expects to achieve the 18% margin through improved cost management and operational efficiencies, with a focus on new market openings [12][13] Question: What is the impact of tariffs on COGS? - Tariffs initially posed a significant risk, but through negotiations with suppliers, the impact was mitigated to about 150-200 basis points on COGS [11][12] Question: How is the class of 2025 performing compared to previous classes? - The class of 2025 is outperforming previous classes by at least 10%, due to better site selection and improved landlord relationships [18][19] Question: What are the future plans for the rewards program? - The company plans to introduce tiered statuses to enhance engagement and drive traffic, moving beyond a simplistic discount-driven model [33]