Sushi restaurant chain Kura Sushi (NASDAQ:KRUS) missed analysts' expectations in Q4 FY2023, with revenue up 30.8% year on year to $54.93 million. Its full-year revenue guidance of $240.5 million at the midpoint came in 1.5% below analysts' estimates. Turning to EPS, Kura Sushi made a GAAP profit of $0.25 per share, improving from its profit of $0.20 per share in the same quarter last year.
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Kura Sushi (KRUS) Q4 FY2023 Highlights:
- Revenue: $54.93 million vs analyst estimates of $55.6 million (1.2% miss)
- EPS: $0.25 vs analyst estimates of $0.25 (small beat)
- Management's revenue guidance for the upcoming financial year 2024 is $240.5 million at the midpoint, missing analyst estimates by 1.5% and implying 28.3% growth (vs 33.2% in FY2023)
- Gross Margin (GAAP): 35.1%, up from 21.5% in the same quarter last year
- Same-Store Sales were up 6.5% year on year
- Store Locations: 54 at quarter end, increasing by 14 over the last 12 months
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 DiningSit-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 GrowthKura Sushi is a small restaurant chain, which sometimes brings disadvantages compared to larger competitors benefitting from better brand awareness and economies of scale. On the other hand, one advantage is that its growth rates can be higher because it's growing off a small base.
As you can see below, the company's annualized revenue growth rate of 30.7% over the last four years (we compare to 2019 to normalize for COVID-19 impacts) was incredible as it added more dining locations and increased sales at existing, established restaurants.
This quarter, Kura Sushi pulled off a wonderful 30.8% year-on-year revenue growth rate, but its $54.93 million of revenue fell short of Wall Street analysts' rosy estimates. Looking ahead, the analysts covering the company expect sales to grow 30.1% over the next 12 months.
Number of StoresThe number of dining locations a restaurant chain operates is a major determinant of how much it can sell and how quickly company-level sales can grow.
When a chain like Kura Sushi is opening new restaurants, it usually means it's investing for growth because there's healthy demand for its meals and there are markets where the concept has few or no locations. Since last year, Kura Sushi's restaurant count increased by 14, or 35%, to 54 locations in the most recently reported quarter.
Over the last two years, Kura Sushi has rapidly opened new restaurants, averaging 22.9% annual increases in new locations. This growth is among the fastest in the restaurant sector and gives Kura Sushi a chance to scale towards a mid-sized company over time. Analyzing a restaurant's location growth is important because expansion means Kura Sushi has more opportunities to feed customers and generate sales.
Same-Store SalesKura Sushi has been one of the most successful restaurants over the last two years thanks to skyrocketing demand within its existing locations. On average, the company has posted exceptional year-on-year same-store sales growth of 58.8%. This performance suggests its rapid buildout of new restaurants is justified. When a chain has strong demand, more locations should help it reach more customers seeking its meals and boost revenue growth.
In the latest quarter, Kura Sushi's same-store sales rose 6.5% year on year. By the company's standards, this growth was a meaningful deceleration from the 27.6% year-on-year increase it posted 12 months ago. One quarter fluctuations aren't material for the long-term prospects of a business, but we'll watch Kura Sushi closely to see if it can reaccelerate growth.
Key Takeaways from Kura Sushi's Q4 Results With a market capitalization of $699.8 million and more than $69.7 million in cash on hand, Kura Sushi can continue prioritizing growth.
We struggled to find many strong positives in these results. Although its adjusted EBITDA and EPS slightly topped analysts' expectations, its revenue fell short thanks to worse-than-expected same-store sales growth. Furthermore, its FY 2024 revenue guidance missed Wall Street's estimates. Overall, this was a mixed quarter for Kura Sushi and investors were likely hoping for better guidance. The company is down 28.6% on the results as expectations going into earnings were high. The stock currently trades at $45 per share.
The author has no position in any of the stocks mentioned in this report.
