Kura Sushi USA Q3 2025 Earnings Report

Kura Sushi USA EPS Results

• Actual EPS: $0.05
• Consensus EPS: -$0.02
• Beat/Miss: Beat by +$0.07
• One Year Ago EPS: N/A

Kura Sushi USA Revenue Results

• Actual Revenue: $73.97 million
• Expected Revenue: $71.82 million
• Beat/Miss: Beat by +$2.15 million
• YoY Revenue Growth: N/A

Kura Sushi USA Announcement Details

• Quarter: Q3 2025
• Date: 7/8/2025
• Time: After Market Closes
• Conference Call Date: Tuesday, July 8, 2025
• Conference Call Time: 5:00PM ET

Kura Sushi USA (NASDAQ:KRUS) operates technology-enabled Japanese restaurants in the United States. The company was formerly known as Kula Sushi USA, Inc. and changed its name to Kura Sushi USA, Inc. in October 2017. The company was founded in 2008 and is headquartered in Irvine, California. Kura Sushi USA, Inc. is a subsidiary of Kura Sushi, Inc.

Kura Sushi USA Q3 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Reservation system rolled out system-wide by early June with uniformly positive guest feedback and is expected to drive both traffic lift and operational efficiencies.
• Positive Sentiment: Opened three new restaurants in Q3 and two more post-quarter, completing guidance for 14 new units and with five additional locations under construction for FY25.
• Neutral Sentiment: Q3 sales reached $74 million with comparable sales down 2.1%—driven by 0.8% price/mix growth offset by a 2.9% traffic decline—while COGS improved to 28.3% and net income was $0.6 million.
• Positive Sentiment: Set a record with seven to eight IP collaborations lined up for FY26, established an IP committee and a dedicated marketing role to maximize these campaigns’ long-term value.
• Positive Sentiment: Introduced a new light rice option for sushi, giving guests smaller rice portions and driving higher plates-per-guest consumption potential.

Presentation

[Operator]

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to Kurosushi USA, Inc. Fiscal Third Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode and the lines will be open for your questions following the presentation. Please note that this call is being recorded.

[Operator]

On the call today, we have Hajime Jimmy Uba, President and CEO Jeff Utes, Chief Financial Officer and Benjamin Porton, Senior Vice President of Investor Relations and System Development. And now I would like to turn the call over to Mr. Porton.

[Benjamin Porten, SVP - IR & Business Development at Kura Sushi USA]

Thank you, operator. Good afternoon, everyone, and thank you all for joining. By now, everyone should have access to our fiscal third quarter twenty twenty five earnings release. It can be found at www.kurosushi.com in the Investor Relations section. A copy of the earnings release has also been included in the eight ks we submitted to the SEC.

[Benjamin Porten, SVP - IR & Business Development at Kura Sushi USA]

Before we begin our formal remarks, I need to remind everyone that part of our discussion today will include forward looking statements as defined under the Private Securities Litigation Reform Act of 1995. These forward looking statements are not guarantees of future performance, and therefore, you should not put undue reliance on them. These statements are also subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. We refer all of you to our SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial condition. Also during today's call, we will discuss certain non GAAP financial measures, which we believe can be useful in evaluating our performance.

[Benjamin Porten, SVP - IR & Business Development at Kura Sushi USA]

The presentation of this additional information should not be considered in isolation nor as a substitute for results prepared in accordance with GAAP, and the reconciliations to comparable GAAP measures are available in our earnings release. With that out of the way, I would like to turn the call over to Jenny.

[Hajime Uba, Chairman, President & CEO at Kura Sushi USA]

Thanks, Ben, and thank you to everyone for joining us today. The last quarter has been a busy one for us between rolling out a new reservation system, investigating new market opportunities, and building out our IT pipeline and strategizing on how to get the most out of our collaborations. We completed the system wide rollout of the reservation system ahead of schedule, made a meaningful progress on building a restaurant pipeline that leverages opportunities demonstrated by Baker's field, and have built our busiest marketing calendar yet for the upcoming fiscal year. I'm extremely pleased with the result on all three fronts, and very proud of the efforts by our team members to maximize summer sales and set our sales up for a great fiscal twenty six. Total sales for the fiscal third quarter were $74,000,000 representing comparable sales growth of negative 2.1%, is price and mix of 0.8%, offset by negative traffic of 2.9%.

[Hajime Uba, Chairman, President & CEO at Kura Sushi USA]

We are pleased to see the business moving in the right direction with sequential improvement in comp performance each month of the quarter. Cost of goods sold as a percentage of sales were 28.3%, representing an improvement of 90 basis points over the prior year quarter's 29.2% due to pricing and ongoing efforts by the supply chain team. Labor as a percentage of sales increased by 50 basis points due to high single digit wage inflation, partially offset by pricing and incremental operational efficiencies. Restaurant level operating profit margin was 18.2% as compared to 20% in the prior year due to higher labor, occupancy, and other costs. During the third quarter, we opened three new restaurants, North Scottsdale, Arizona, Washington State, and McKinney, Texas.

[Hajime Uba, Chairman, President & CEO at Kura Sushi USA]

Subsequent to quarter end, we opened two more units, one in Woodlands, Texas, and one in Salt Lake City, Utah. We are very pleased with the class of 2025, with many of our restaurant openings exceeding our expectations. Joined our top five restaurants shortly after opening, underscoring the tremendous opportunity we see in The Pacific Northwest. At the beginning of the fiscal year, we provided unit development guidance of 14 new restaurants, which we achieved with last week's Salt Lake City opening. I'll leave it to Jeff to share our thoughts on guidance for the remainder of the year, but I will mention that we have currently five units under construction.

[Hajime Uba, Chairman, President & CEO at Kura Sushi USA]

Over the last several calls, we have been discussing the opportunity in smaller DMAs, as demonstrated by the success of this year's opening in Bakersfield, California, And has a greater optionality created by these smaller markets, can not only expand our wider space potential, but also serve as a function of the comp tailwind by reducing the number of openings in markets that can cannibalize sales. We have mentioned that we hope to get back to a fifty fifty split between new and existing markets by fiscal twenty twenty seven, and that we've been hard at work developing previously unexplored DMUs like Des Moines, Richmond, and Tulsa. I'm very pleased to say that we now have properties under negotiation at each of these markets. Turning to marketing. We have seven to eight IV collaborations lined up for fiscal twenty twenty six, which, as we mentioned in the previous call, is a record for us.

[Hajime Uba, Chairman, President & CEO at Kura Sushi USA]

Fiscal twenty twenty six, we have no interactions between IV campaigns, and we're revamping this fiscal year. We've included a four to five month stretch without IB collaborations. We have a renewed appreciation for the roles that collaborations play in our sales and have made investments to better utilize this opportunity that is unique to Kura. In addition to creating a new role in our marketing team, which will be fully dedicated to researching and negotiating with new licensors, We have also established an intellectual property committee to facilitate the development of longer term strategies as it relates to our IP collaborations. To close, I would like to provide an update on our system development efforts.

[Hajime Uba, Chairman, President & CEO at Kura Sushi USA]

While we had originally expected to complete the implementation of the reservation system by the end of the fiscal year, we were able to roll out reservations across all restaurants by early June. The response from guests and the team members has been uniformly positive. While it's too early for us to quantify the impact of the reservation system, we believe it has great potential as a comp driver and have identified system improvement opportunities, which we believe could drive operational efficiencies as well. Although the implementation of these improvements will take some time, we are pleased with the strong start and look forward to being able to share more quantified expectations in future calls regarding potential traffic lift and labor improvement through the reservation system. As a final note, I'm pleased to also announce the introduction of our new light life option, which will give give guests even more control over how they experience Kura by introducing the option to order sushi with smaller portions of rice.

[Hajime Uba, Chairman, President & CEO at Kura Sushi USA]

The third quarter has been a very busy one for us, and it's exciting to see so many of our initiatives come online or across the finish line. All of our team members, both at our restaurants and our chief support center, have been doing incredible work to make this happen. Thank you, everyone. Jeff, I'll hand it over to you to discuss our financial results and liquidity.

[Jeff Uttz, CFO at Kura Sushi USA]

Thank you, Jimmy. For the third quarter, total sales were $74,000,000 as compared to $63,100,000 in the prior year period. Comparable restaurant sales performance compared to the prior year period was negative 2.1% with traffic at negative 2.9% and price and mix positive 0.8%. Effective pricing for the quarter was 4.3%. On June 1, we took a 1% menu price increase and after lapping prior year increases, our effective price for the fourth quarter will be 3.5%.

[Jeff Uttz, CFO at Kura Sushi USA]

Comparable sales in our West Coast market were flat and comparable sales in our Southwest market were negative 2.5%. As we've been discussing for the last several months, we were looking forward to our third quarter, where our comp comparison eased and that optimism was met with encouraging sequential monthly results as Jimmy mentioned earlier. Turning now to costs, food and beverage costs as a percentage of sales were 28.3% compared to 29.2% in the prior year quarter, largely due to pricing and supply chain initiatives. We continue to be fortunate that tariffs have not caused a meaningful negative impact to our food and beverage costs and we are continuing to work with our suppliers to minimize any future impacts. Labor and related costs as a percentage of sales were 33.1% compared to 32.6% in the prior year quarter.

[Jeff Uttz, CFO at Kura Sushi USA]

This increase was largely due to wage inflation, partially offset by pricing and operational efficiencies. Occupancy and related expenses as a percentage of sales were 7.5% compared to the prior year quarter's 6.8% due to sales deleverage. Depreciation and amortization expenses as a percentage of sales were 4.7% as compared to the prior year quarter's 5%. Other costs as a percentage of sales were 14.7% as compared to the prior year quarter's 14.1% due to sales deleverage. General and administrative expenses as a percentage of sales were 11.8% as compared to 14% in the prior year quarter due to sales leverage, lower public company costs as we lapped the first year of four zero four B SOX compliance and lower litigation related costs.

[Jeff Uttz, CFO at Kura Sushi USA]

Just a moment, I will be discussing our updated guidance for our full year G and A expense. Operating loss was $162,000 compared to operating loss of 1,200,000 in the prior year quarter due to the lower G and A expenses discussed previously. Income tax expense was $55,000 compared to $60,000 in the prior year quarter. Net income was $565,000 or $05 per share, compared to a net loss of $558,000 or negative $05 per share in the prior year quarter. Restaurant level operating profit as a percentage of sales was 18.2% compared to 20% in the prior year quarter, largely due to sales deleveraging, increased labor expense and higher other costs.

[Jeff Uttz, CFO at Kura Sushi USA]

Adjusted EBITDA was $5,400,000 as compared to $4,500,000 in the prior year quarter. We're particularly pleased at being able to increase our adjusted EBITDA by 20%, even with higher restaurant operating costs. Turning now to our cash and investments. At the end of the fiscal third quarter, we had $93,000,000 in cash, cash equivalents and investments and no debt. And then lastly, I am pleased to update our guidance for the full fiscal year 2025.

[Jeff Uttz, CFO at Kura Sushi USA]

We expect total sales to be approximately $281,000,000 We expect to open 15 new units, maintaining an annual unit growth rate above 20% with average net capital expenditures per unit of approximately $2,500,000 And we now expect general and administrative expenses as a percentage of sales to be below 13%, exclusive of any legal settlements. And now I will turn it back over to Jimmy.

[Hajime Uba, Chairman, President & CEO at Kura Sushi USA]

Thanks, Jeff. This concludes our prepared remarks. We are now happy to answer any questions you have. Operator, please open the line for questions. As a reminder, during the Q and A session, I may answer in Japanese before my response is translated into English.

[Operator]

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one or your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star two to remove yourself from the queue.

[Operator]

For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. And our first question comes from the line of Jeremy Hamblin with Craig Hallum. Please proceed with your question.

[Jeremy Hamblin, Senior Research Analyst at Craig-Hallum Capital Group LLC]

Thanks so much and congrats on the strong results. I wanted to see if we might be able to dive in a little bit to the commentary around the new reservation system initiative and kind of the timing of that along with the timing of bringing your latest IP collaboration back kind of lends itself. I wanted to see if you might unpack the same store sales trends cadence during the quarter a little bit more for us to get a sense for how May performed as you brought that IP Collab back versus the first two months of the quarter. And a sense for you had a pretty big raise in your sales guidance for the year, how things have started out here in June?

[Benjamin Porten, SVP - IR & Business Development at Kura Sushi USA]

Jeremy, this is Ben. Thanks for the questions. Great to hear from you. We're really happy with the reservation system. As as Jimmy mentioned, we did see sequential improvement throughout the quarter with each month being better than the last through March, April, and May.

[Benjamin Porten, SVP - IR & Business Development at Kura Sushi USA]

We began rollout of the reservation system in late February, but it I'd say, like, it really began in earnest in April, and we were largely done by May. And so you can sort of see that benefit rolling along as well. And we began the PDAS campaign in very late April and had it running through May and June. And that the two of those combined has been really one of the big reasons that we were so happy with how the last quarter shook out. One other thing to keep in mind is that the reservation system, just given that we've been the rollout has overlapped with these time limited things, the peanuts campaign and now the hollow live campaign.

[Benjamin Porten, SVP - IR & Business Development at Kura Sushi USA]

We haven't had dedicated advertisements just for the reservation system. And the messaging that we have done is largely focused just towards our rewards members. And so we're very pleased to see the results that we're seeing right now and believe that there's additional upside as we communicate this further to our guests.

[Hajime Uba, Chairman, President & CEO at Kura Sushi USA]

I have a comment about a question for

[Benjamin Porten, SVP - IR & Business Development at Kura Sushi USA]

Going back to the monthly cadence that we've seen in Q3 May coincided with the introduction of our first IP campaigns really four or five months. And that was also when our comps turned positive. And so it was really, really great to see not just positive comps, positive traffic as well in May. And we have those IP collaborations continuing through the current quarter. And we're very pleased with how the current quarter is performing as well.

[Jeff Uttz, CFO at Kura Sushi USA]

And then Jeremy, your last question about the guidance raise to February. Last quarter, we were pretty certain that we would be close to there as well. But we've been really gun shy about raising our guidance too early, just based on what happened last year about this time. This wasn't a great call for us in July. So we wanted to be certain that we felt really good about that before we told everybody that we thought we were going to be higher than our previous range of two seventy five to two seventy nine.

[Jeremy Hamblin, Senior Research Analyst at Craig-Hallum Capital Group LLC]

Totally understandable, especially when you guys were reporting in early April. Just one follow-up question. I wanted to ask on labor. And so you had about 50 basis points of deleverage in the quarter. Obviously, a negative comp doesn't help on that, but wanted to get a sense for what your wage rates are on a year over year basis currently.

[Jeremy Hamblin, Senior Research Analyst at Craig-Hallum Capital Group LLC]

And then in terms of looking at Q4, where you would need to comp to see a positive leverage on that labor line item?

[Benjamin Porten, SVP - IR & Business Development at Kura Sushi USA]

For Q4, our expectation is that we'll see mid to low single digit labor inflation, which would be an improvement from what we've seen in Q2 and Q3. It goes without saying that a positive comp makes it easier to lever labor year over year. And without giving really any commentary on quarter to date comps, we're very pleased with how the quarter is progressing. One thing that we've been seeing unfold over the last couple of months is all the initiatives that we've been working on over the last year and really going as far back into last year with the operational streamlining. And then this year supplemented by the new Mr. Fresh, the new touch panels and the reservation system. You see the benefit of those labor initiatives trend along with sales leverage. And we're seeing really everything blossom now. And so that's been a real pleasure to watch.

[Jeremy Hamblin, Senior Research Analyst at Craig-Hallum Capital Group LLC]

Thanks so much for all the color and taking the questions and best wishes the remainder of the year.

[Benjamin Porten, SVP - IR & Business Development at Kura Sushi USA]

Thanks, Jeremy.

[Hajime Uba, Chairman, President & CEO at Kura Sushi USA]

Thank you, Jeremy.

[Operator]

Thank you. And our next question comes from the line of Jeff Bernstein with Barclays. Please proceed with your question.

[Jeffrey Bernstein, Equity Research Analyst at Barclays Capital]

Great. Thank you very much. Couple of questions. The first one, looking to clarify your comments on the tariff implications. It seems like you guys report shortly after tariff discussions.

[Jeffrey Bernstein, Equity Research Analyst at Barclays Capital]

So I know last quarter there was tariff rollout kind of right before you guys reported it. And then I know there's been some Japan headlines around tariffs just in the past day or two. So know it's difficult for you, but it sounds like you're fairly confident that there's no material impact. I'm just wondering if you could share any incremental color, especially now that we do have some specifics in terms of at least what's tariffs related to Japan. So any color you could provide in terms of the impact on the cost structure or any pricing you might take would be very helpful. And then I had a follow-up.

[Jeff Uttz, CFO at Kura Sushi USA]

Sure, Jeff. This is Jeff. And we knew this question was coming. And to be honest, I prerecorded last week, late last week. And that's the tariff commentary in there.

[Jeff Uttz, CFO at Kura Sushi USA]

It was related to last week. Obviously, this new news came out yesterday. But what I can tell you as well, we don't just because it's been twenty four hours, I don't have a monetary impact yet based on the projected tariff. But I can tell you that about 45% of our basket comes from Japan, Korea, and Vietnam. And so we'll be able to calculate an impact later.

[Jeff Uttz, CFO at Kura Sushi USA]

As I mentioned in previous calls, our Japanese suppliers have been very eager to sit with us and say, look, we'll share some of this impact. We don't know if that's fiftyfifty, sixtyforty. We don't know those numbers yet. As soon as we get clarity on those numbers, then we'll be able to calculate more of a monetary impact of what it might do to our COGS, and we'll be able to share that at a future conference or in a future call. We also are hopeful that 25% is not the final number.

[Jeff Uttz, CFO at Kura Sushi USA]

As you know, these things have bounced around. Trump uses these things as leverage a lot of times as we know. And where it ends up by August 1, we will see. But we're in a good place in our COGS number right now, in the low 28s. And if we do have an impact, feel pretty good about the fact that that impact shouldn't throw us north of 30, even if it were really high.

[Jeff Uttz, CFO at Kura Sushi USA]

So we're in a much better place than if our cost of goods sold was, say, at 30.5 or 31. So we're optimistic about what's going to happen over the next three to four weeks in terms of negotiations, and we'll be able to have further color the next time we get in front of investors.

[Jeffrey Bernstein, Equity Research Analyst at Barclays Capital]

Understood. Thank you. And then just on the the restaurant margin, I know in past quarters, you've talked about your, I guess, longer term confidence sustaining the 20% plus, and I think you had been confident in achieving that in fiscal twenty five. Though it looks like we're running more in the 17% to 18% range year to date. So I'm assuming it's going be difficult to get to 20% in fiscal twenty twenty five.

[Jeffrey Bernstein, Equity Research Analyst at Barclays Capital]

I know you guys don't chase a margin, but I'm just wondering your perspective on the outlook for the margin in the fourth quarter and or whether or not fiscal twenty twenty six in a more normalized environment you'd be confident to suggest we could be back north of 20% again? Thank you.

[Benjamin Porten, SVP - IR & Business Development at Kura Sushi USA]

Speaking to the current year, already more than nine months into fiscal twenty five and with the quarter to date, I'm sorry, the year to date number bridging that to a 20% plus number is difficult. But we don't think there's anything that is structurally changed about our margins and absolutely 20% plus is our target for fiscal twenty twenty six. Looking at fiscal twenty six, we're feeling very good about our position as it relates to comps. We're lapping fiscal twenty five, which had a four to five month stretch without IT campaigns. Next year, we have the most IT campaigns we've ever had.

[Benjamin Porten, SVP - IR & Business Development at Kura Sushi USA]

We also have the reservation for the full year. And so we just coming into the year, we're in a very strong position and we see no reason that we wouldn't be able to achieve positive comps and have that flow through to a 20% plus threshold of operating margin. And with positive comps that would naturally allow us better leverage on labor, occupancy, other costs, depreciation, and that would drive our margin expansion, or really a return to margin normalcy.

[Jeffrey Bernstein, Equity Research Analyst at Barclays Capital]

Got it. If I could just slip one more in, Jeff, I know you like to talk about the G and A leverage, which lowering your target for this fiscal year, obviously very impressive. I'm just wondering that further reduction, any color you can share in terms of the biggest buckets of these incremental savings and whether or not you think I know you talk long term about being sub 10%, but should we continue assuming a path trajectory the way we've been seeing recently in terms of how we should think about fiscal twenty twenty six versus that sub 13% in fiscal twenty twenty five? Thank you.

[Jeff Uttz, CFO at Kura Sushi USA]

Yeah. The biggest basket is really the headcount. And I the the team and and leadership and the support center and in field operations has done a really good job of figuring out how to better allocate work to everybody rather than just adding people when things get backed up. So it's really been a group effort. Salaries is the biggest piece of that G and A.

[Jeff Uttz, CFO at Kura Sushi USA]

So with everybody's focus, that's how we were able to get there. Now, that leverage that we got this year was much higher than I expected, clearly, with the guidance raised from where we were at the beginning of the year in the mid-13s. Going forward, I do expect additional leverage. In the past, I think I had said 50 to 60 basis points a year. Next year, honestly, Jeff, I don't know if it'll be quite that high just because of how much we got this year.

[Jeff Uttz, CFO at Kura Sushi USA]

I do expect leverage next year, but maybe not to that 50 to 60 basis point. But I do believe that in future years, might be able to get back there after we get through fiscal 'twenty six.

[Jeffrey Bernstein, Equity Research Analyst at Barclays Capital]

Understood. Thank you.

[Jeff Uttz, CFO at Kura Sushi USA]

Thank you.

[Hajime Uba, Chairman, President & CEO at Kura Sushi USA]

Thank you, Jeff.

[Operator]

Thank you. And our next question comes from the line of Andrew Charles with TD Cowen. Please proceed with your question.

[Zach Ogden, VP - Equity Research at TD Cowen]

Thank you. This is Zach Ogden on for Andrew. Just based on our math, it looks like the new store productivity has improved so far in 2025 relative to 2024. So are you seeing the Class of 2025 opening stronger than the class of 2024? And if so, what's that driven by?

[Benjamin Porten, SVP - IR & Business Development at Kura Sushi USA]

Yeah, fiscal twenty five is certainly started in fiscal twenty four. It's one of the strongest classes we've had in recent memory. Really, really pleased. A big part of that would be our opening up of the Pacific Northwest as Jimmy mentioned in his prepared remarks, Linwood pretty much immediately entered our top five. And so that's been a great tailwind for us.

[Benjamin Porten, SVP - IR & Business Development at Kura Sushi USA]

And besides building out one of the most promising markets that we've had, we've also been exploring new DMAs. So, Fisher's in Indiana would be an example. Bakersfield is another example that we've returned to over the past couple of earnings calls, but all of them are doing very well. And what's critical about Fisher's and Bakersfield is that they provide data points for us in terms of our pipeline building in the future gives us that much more optionality in terms of how we build our pipeline. And that's really going to be the biggest part of us getting back to a fiftyfifty split for fiscal twenty seven.

[Benjamin Porten, SVP - IR & Business Development at Kura Sushi USA]

And so we're very pleased across the board with performance, not just in infilling existing markets, where we knew that we do well, but having positive surprises in new markets as well.

[Zach Ogden, VP - Equity Research at TD Cowen]

Got it. Thank you.

[Zach Ogden, VP - Equity Research at TD Cowen]

And then just last call, you had called out a $300,000 to $400,000 impact to new store build costs from tariffs. Has that expectation changed at all since the last call based on the different tariff rates?

[Jeff Uttz, CFO at Kura Sushi USA]

No. That 300,000 to 400,000 is still our expectation at worst case scenario given the current tariff situation.

[Benjamin Porten, SVP - IR & Business Development at Kura Sushi USA]

Okay, got it. Thank you.

[Jeff Uttz, CFO at Kura Sushi USA]

Thanks, Zach.

[Hajime Uba, Chairman, President & CEO at Kura Sushi USA]

Thanks, Thank

[Operator]

you. And our next question comes from the line of Todd Brooks with Benchmark Company. Please proceed with your question.

[Todd Brooks, Equity Research Analyst at The Benchmark Company LLC]

Hey, thanks, and congratulations on the results this quarter. Great to see. Quick questions. One, following up on reservation. I know we're a little ways away from getting quantifiable data.

[Todd Brooks, Equity Research Analyst at The Benchmark Company LLC]

But just from what you're seeing in the early experience with the platforms in place, are you seeing those larger boosts around lunch and maybe late night, kind of those where you knew you had capacity if you could unlock it with the surety of being able to get a seat? And then another follow-up on the reservation side. I know that we've really, I think, just started promoting it to loyalty program members recently. Thoughts on the ability to take it to non loyalty and message it more broadly and draw some new people to the brand to try the restaurant? Or do we need to leg into that just to handle the capacity that we get in a pickup from loyalty program members alone?

[Benjamin Porten, SVP - IR & Business Development at Kura Sushi USA]

No, absolutely. To answer your second question first, that is absolutely the next thing that's on the docket for us. Right now, our guests have been organically discovering it. I'm sorry, our rewards members have been organically discovering it as the reservation button is exactly where the old waitlist button was. And so there's really no change to the guest flow.

[Benjamin Porten, SVP - IR & Business Development at Kura Sushi USA]

And so people discover pretty naturally. Otherwise, it's been secondary messaging in our marketing emails. But we do believe that this is a massive, massive catalyst for rewards member registrations. And so certainly, we want to capture that. In terms of what we've seen in the early days, just given that our last restaurant rolled out in mid June, I don't want to see any numbers that you're going be basing your modeling off of.

[Benjamin Porten, SVP - IR & Business Development at Kura Sushi USA]

But one really important point that we've been able to cooperate for statistical analysis is that half of our reservation for half more than half of our desk with reservations are being seated within two minutes of arrival, which I mean, that's night and day from what guests are used to. And so I can get a pretty clear idea of the massive opportunity there is here.

[Todd Brooks, Equity Research Analyst at The Benchmark Company LLC]

That's fantastic. And then a final question, I'll jump back in queue. You've talked about the IP partnership and the strength that you're seeing and the coverage that you're seeing. I think there was a comment that you'll be covered for all the weeks of fiscal 'twenty six versus being dark on IP partnerships for four to five months here in fiscal 'twenty five. I know we're not going to get details on what's making up the pipeline, but can you talk qualitatively about the quality of the pipeline and maybe the magnitude of the partners?

[Todd Brooks, Equity Research Analyst at The Benchmark Company LLC]

Because it sounds like there's that much more internal effort against it as well with the new committee and just really a focus on extracting more return out of these efforts. Thanks.

[Benjamin Porten, SVP - IR & Business Development at Kura Sushi USA]

Yeah, I mean, speaking in terms of if you just look at our pipeline from past years, it's pretty clear that the properties just get bigger and better every year. I think one thing that's really key to our earnings strategy is that while we have been able to get consistently bigger partners, they haven't necessarily translated to bigger sales. And just by having more partnerships per year, that gives us more at bats, that many more opportunities to discover really what's going to be successful, what's good and build our portfolio based off of that. And so the upcoming several campaigns that we have are Demon Slayer and One Piece, which are two the best properties we've partnered with. Following that, we have Kirby, which is the biggest Nintendo property that we've ever partnered with.

[Benjamin Porten, SVP - IR & Business Development at Kura Sushi USA]

We're very pleased. But renewed focus on the IP collaborations, I think, is going to be a very key part of our discussions as it relates to fiscal 'twenty six. We're being a little bit more experimental. So for instance, with the current holiday live campaign, we don't have associated bigger up on giveaways, but it's still been a massive traffic driver because of the intensity of the fandom. So we've got these cups for sale and we have food collaborations, but that's still been a very meaningful traffic driver.

[Benjamin Porten, SVP - IR & Business Development at Kura Sushi USA]

And having these campaigns without that are relatively sort of investment light, let's us be that much more experimental, let's just have that many more campaigns per year, which will get us closer to that ideal portfolio that much faster.

[Todd Brooks, Equity Research Analyst at The Benchmark Company LLC]

That's great. Thanks, Ben. Congrats, everyone.

[Benjamin Porten, SVP - IR & Business Development at Kura Sushi USA]

Thank you.

[Jeff Uttz, CFO at Kura Sushi USA]

Thank you.

[Hajime Uba, Chairman, President & CEO at Kura Sushi USA]

Thank you.

[Operator]

You. And our next question comes from the line of Mark Smith with Lake Street Capital. Please proceed with your question.

[Mark Smith, Senior Research Analyst at Lake Street Capital Markets]

Hi, guys. Just as we look at restaurant level expenses here, just wanted to dig in on on other costs. You know, is this purely, utilities or other things that are that drove that a little bit higher here during the quarter?

[Benjamin Porten, SVP - IR & Business Development at Kura Sushi USA]

In terms of what's really the major components of our other costs growing as compared to say a couple of years ago, it's really just minor growth across the board. So slight increases in R and M costs, slight increases in utilities. Really, the way that we think about it is the other cost numbers for Q2 were abnormally low. So you can sort of think of the 14.7% we had for Q3 as a bounce back. Year to date, our other cost as a percentage of sales is 14.3%, which is exactly where it was for the full year fiscal 'twenty four.

[Benjamin Porten, SVP - IR & Business Development at Kura Sushi USA]

We think that 14% -ish is where we're going be running for the foreseeable future.

[Mark Smith, Senior Research Analyst at Lake Street Capital Markets]

Perfect. Then just similar, as we think about G and A, I know that Jeff, you just talked a little bit about kind of people and salaries and things that are in there. You know, it's great seeing that guidance come down. Is is there been have there been cuts or, you know, are you continuing to to add people? I I I just love more insight into kind of how you're you're managing, g and a and if it's if it's purposeful, kind of keeping the the belt tight or if it's just kind of the the sales growth that that's keeping that down and and relating to the guidance that we saw here today.

[Jeff Uttz, CFO at Kura Sushi USA]

It's purposeful, keeping it down. It's not due to cuts. We have not cut people, and we do not plan to cut people. This is more of slowing down the hiring. And I think it's a change in mindset.

[Jeff Uttz, CFO at Kura Sushi USA]

Several years ago maybe were a little quick to hire people when things got a little rough. And rather than thinking about alternative ways to do things, how we allocate work, how we can see who has some bandwidth to take on some more things. And everybody's done just a good job of doing that. So when there is a new hire request, it gets a lot more scrutiny now than when I first started with the company. And people are just thinking about different ways of doing things.

[Jeff Uttz, CFO at Kura Sushi USA]

And the approval process for new hires goes through a lot more people than it did previously. And I challenge it quite a bit as a financial officer. To give a good example, when I joined the company, we were able to cut the number of requested new hires in the budget in half or more than half. From like 21 requested new hires, I think we went down to six or seven. And that was three years ago, and it's worked out.

[Jeff Uttz, CFO at Kura Sushi USA]

So with that change in mindset, I think that it's the way that we will be doing things in the foreseeable future, which is why I'm very optimistic about that. North of 300 basis points of leverage over three years is something that we are very proud of as a management team.

[Mark Smith, Senior Research Analyst at Lake Street Capital Markets]

Excellent. And if I can squeeze in one more. As we think about the successes as you've moved into maybe some smaller markets, does that change your outlook on kind of your total pipeline and how many units you think you can build across The U. S. Over time?

[Benjamin Porten, SVP - IR & Business Development at Kura Sushi USA]

Of course. We're happy for you to fill in whatever that number you think will be.

[Mark Smith, Senior Research Analyst at Lake Street Capital Markets]

Okay. Perfect. Thank you, guys.

[Hajime Uba, Chairman, President & CEO at Kura Sushi USA]

Thank you, Mark.

[Operator]

Thank you. And our next question comes from the line of Jon Tower with Citi. Please proceed with your question.

[Jon Tower, Director - Equity Research at Citigroup]

Great. Thanks for taking the questions. Maybe Jeff, following up to the comment you made earlier on tariffs and the idea of COGS maybe moving north of 30% or maybe not hitting north of 30%. So, I guess the implication there is that you guys would absorb all the impact of any sort of tariffs rolling through even if you're negotiating with your suppliers there like or better said, you're not going to necessarily take pricing to offset the impact of tariffs on COGS. Is that the best way to interpret that?

[Jeff Uttz, CFO at Kura Sushi USA]

Well, we would take on the portion that we agreed to with the vendors, whatever, wherever that ends up, it was fiftyfifty or whatever. Yes, pricing is a last resort. But I will tell you that our effective pricing in November goes down to 1%. So when that happens, we do have some pricing power if we need to do that. But we want to leave that as a last option, certainly.

[Jeff Uttz, CFO at Kura Sushi USA]

But we could do that. We're just hopeful that the 25% number that's currently out there will end up being much lower. And that's what the hope is going to be. And it's been twenty four hours. And I think as Jeff Bernstein said earlier, unfortunately, we get to deal with these things within a day or two after they happen on the last two calls.

[Jeff Uttz, CFO at Kura Sushi USA]

So we will have more color on this as we get further in, but that's our current thought process.

[Benjamin Porten, SVP - IR & Business Development at Kura Sushi USA]

And just to add on that, as it relates to COGS, I think we have a massive opportunity in fiscal 'twenty six through the light rice program that Jimmy had mentioned. I had the opportunity to try it for the first time last week, and typically I'll top out at five or six plates. I ate at least 10 plates without thinking about it. And I'm sure that there are going to be tons of other guests that are just as enthusiastic about this. And so if we can really get what we can get what we expect from the light rights, that's a big lever for us for fiscal twenty six.

[Benjamin Porten, SVP - IR & Business Development at Kura Sushi USA]

And as Jeff mentioned, we want to pull every other lever before we pull pricing.

[Jon Tower, Director - Equity Research at Citigroup]

Got it. And and can you just speak to what that light rice is? I I just haven't heard of it before.

[Benjamin Porten, SVP - IR & Business Development at Kura Sushi USA]

Yeah. So it's it's for most of our nigiri options. When you order on the touch panel, you'll have an option like regular rice or light rice, and the light rice is just the it's a smaller portion of rice.

[Jon Tower, Director - Equity Research at Citigroup]

Okay. So lower COGS. Is that the same price point, lower COGS?

[Benjamin Porten, SVP - IR & Business Development at Kura Sushi USA]

Or it's it's also I mean, lower lower COGS, but also it does it's not as filling. And so I ate twice as much as I usually do when I was choosing the white rice options.

[Jon Tower, Director - Equity Research at Citigroup]

Okay. And then just on I know fiscal twenty twenty seven, you're pointing to getting back to a fifty-fifty split on new versus emerging markets or excuse me, new versus existing markets. Can you speak to that number for new stores in '26? I'm sorry if I misspoke. I meant 27, you're talking about new stores, fifty-fifty.

[Jon Tower, Director - Equity Research at Citigroup]

What that looks like in '26? And then are you still anticipating, I think, roughly a 4% or so cannibalization number dragging on the business next year?

[Benjamin Porten, SVP - IR & Business Development at Kura Sushi USA]

In terms of our expectations for fiscal twenty twenty six, we're looking at a pipeline where it's going to be about 70% existing markets, 30% new. In terms of the impact of the existing the new units in existing markets, we think it's going be largely in line with the 400 basis point headwind that we saw in fiscal twenty twenty five and 2024. And then as it relates to fiscal twenty twenty seven, we expect to continue to maintain that 20% unit growth. We do think we'll be able to get back to that fifty-fifty, which would naturally just cut that comp headwind in half.

[Jon Tower, Director - Equity Research at Citigroup]

Okay. And then just last piece for me. In terms of it's great to hear the IP collaboration stepping up next year, it sounds like you're going be on pretty much all year or throughout the year in fiscal twenty twenty six. In the past, I think you've kind of had some hit or misses when it comes to some of the IP tie ins. So can you speak to your confidence or how you're approaching it differently this time to ensure that the hit rates are higher than perhaps past initiatives or past IP tie ins that you've had?

[Benjamin Porten, SVP - IR & Business Development at Kura Sushi USA]

Yeah. Well, I think the biggest frustration in the past was really sort of opportunity cost, where if you had a miss, it wasn't just that you had a miss, you had a miss that was eating up two months of your calendar that could be better spent with a better collaboration. And just by having seven to eight, which is meaningfully more than we've had this year, it's the most that we've had of any year, we get that many more tries, so to speak, to find what successful ones are. And based off of those successes, we know what to repeat in future years.

[Jon Tower, Director - Equity Research at Citigroup]

Got it. So, it's effectively just frankly sprinkling in more throughout the year. So you have a better idea of what works and what you can repeat. Okay, cool. Awesome. Thanks for taking the questions.

[Hajime Uba, Chairman, President & CEO at Kura Sushi USA]

Thank you, John.

[Benjamin Porten, SVP - IR & Business Development at Kura Sushi USA]

Of course.

[Operator]

Thank you. Our next question comes from the line of Jim Sanderson with Northcoast Research. Please proceed with your question.

[Jim Sanderson, MD & Research Analyst at Northcoast Research]

Thanks for the question and congratulations on a great quarter. I wanted to talk a little bit more about the mix component of same store sales. How you expect that to progress going forward, if that's related to how you're rolling out collaborations and how we should look at that as you roll off pricing in November?

[Benjamin Porten, SVP - IR & Business Development at Kura Sushi USA]

We're very excited to see where we can bring mix in fiscal twenty twenty six. So over the last couple of years, our mix has gone from negative high single digits to hovering between negative low single digits to mid single digits. Part of that from this fiscal year, be the headwind from the lack of IT collaborations. Have typically with every IP collaboration, we'll have a giveaway that's associated with a certain spending threshold, typically $70 or so. Giveaway campaign that we had for HoloLive was actually at a higher dollar threshold because we saw there's that much guest interest for it.

[Benjamin Porten, SVP - IR & Business Development at Kura Sushi USA]

And so that naturally drives average ticket. The light price we think is a big opportunity in terms of average check growth. My personal expectation is that this will grow the number of plates per person. And I think that's really an opportunity that we're going be leaning into. The other is the twenty fifth Plate Initiative.

[Benjamin Porten, SVP - IR & Business Development at Kura Sushi USA]

We're really pleased with the early results. What we have seen is pretty much exactly what we expected is minor pressure on transactions above 30 plates, but more than enough growth in the 25 plate plus category to offset that. And so we're really happy to see that.

[Jim Sanderson, MD & Research Analyst at Northcoast Research]

All right, thank you for that. Just wanted to talk a little bit more about the res system as it's related to membership levels. Have you seen any notable increase in membership in the fourth quarter? Or could you update us on where that membership rate is?

[Benjamin Porten, SVP - IR & Business Development at Kura Sushi USA]

So membership rates the are growth rate is pretty much the same as past quarters. And a big part of that is we haven't communicated the reservation system to non rewards members yet. So I expect in November, I'll be able to give you the answer you're looking for.

[Jim Sanderson, MD & Research Analyst at Northcoast Research]

Very good. Last question for me. Could you just update us on the various technology initiatives you've got in process? I think you've got the res system you're just finishing. I think you've got some point of sale issues to resolve.

[Jim Sanderson, MD & Research Analyst at Northcoast Research]

And then there's the robotic dishwasher. Is there anything else out there that could have an impact, good or bad, on operations going forward?

[Benjamin Porten, SVP - IR & Business Development at Kura Sushi USA]

Yeah. One of the biggest things that we're excited for fiscal twenty six would be the dish robot. Our strong hope was to get it live in fiscal twenty five, but I'm not sure if we'll be able to do that, but it really does seem like we'll be able to get certification within a matter of months. The units that we're building in fiscal twenty six are built from the blueprint stage, assuming the eventual installation of these robots. And so that's going to be a very meaningful opportunity should reduce headcount fully two to one.

[Benjamin Porten, SVP - IR & Business Development at Kura Sushi USA]

And then while the reservation system is at each of our restaurants, we still see lots of opportunity for improvements, especially as it relates to employee efficiency. We've got a list of about 70 different things that we're working on as it relates to the reservation system. That we think is going to have pretty meaningful upside opportunities as it relates to front of house efficiencies.

[Jim Sanderson, MD & Research Analyst at Northcoast Research]

All right. Thank you very much.

[Hajime Uba, Chairman, President & CEO at Kura Sushi USA]

Thank you.

[Benjamin Porten, SVP - IR & Business Development at Kura Sushi USA]

Thank you.

[Operator]

And our next question comes from the line of George Kelly with ROTH Capital Partners. Please proceed with your question.

[George Kelly, MD & Senior Research Analyst at Roth Capital Partners, LLC]

Hey, everybody. Thanks for taking my questions. First, most of them have been asked and answered, but just a quick follow-up on the prior question. Can you be any more specific about the efficiency opportunity that you see available in 2026 from reservations?

[Benjamin Porten, SVP - IR & Business Development at Kura Sushi USA]

Yeah. So so just as a a couple things, as a couple examples, the seating process is is meaningfully simplified before when the seater or the host was seating a guest, they had to they had to enter information on three different terminals. And we've, cut that labor by two thirds. So there's only one terminal that they're touching in the process itself is simplified. One unexpected efficiency opportunity that we've seen is in busing.

[Benjamin Porten, SVP - IR & Business Development at Kura Sushi USA]

And this really this this hadn't occurred to me until I've actually seen this happen in in the restaurants once we've implemented it. But there's an element of psychological pressure when you have reservation times that you've promised somebody. Before we we did it on a wait list, and so you knew, like, parties 26, 27, 28 were waiting. And that's a different feeling from being at seven, you know, being at 07:30, knowing that there are three parties that you'd promised to seat them at 07:00 waiting for you. The buses are actually moving more quickly.

[Benjamin Porten, SVP - IR & Business Development at Kura Sushi USA]

And so that's opportunity, especially in the peak hours. And so I'm excited to see just how much we can get out of that.

[George Kelly, MD & Senior Research Analyst at Roth Capital Partners, LLC]

Okay, that's helpful. Thanks.

[George Kelly, MD & Senior Research Analyst at Roth Capital Partners, LLC]

And then second question for me, back to the light rice. Ben, you sound confident about either what you're seeing or what sort of how you expect the reception you expect to get from that. Can you just give us a little more background on like why you have that level of confidence about the sort of plate opportunity and maybe it's been tested at certain locations and when do you expect it to fully roll out? So just I guess adding context about that would be great.

[Benjamin Porten, SVP - IR & Business Development at Kura Sushi USA]

The biggest thing that gives us confidence is that this isn't this is something that Korea Japan has already been doing for years. And when they implemented this, they did see mix improvement. They did see ticket growth. We were able to implement this now because of the update to the new touch panel system, which gives us much more flexibility. And so just looking at the results from Japan gives us a lot of confidence.

[Benjamin Porten, SVP - IR & Business Development at Kura Sushi USA]

What I was thinking earlier was really just from my personal experience. I really loved it. I would strongly encourage you to try it. And I think you'll feel as confident. You'll understand my confidence once you try it, but there really is a very big opportunity there.

[Benjamin Porten, SVP - IR & Business Development at Kura Sushi USA]

We've already got this at about 50 of our restaurants. And I'm really happy that we have this. It's really something that our guests have been asking for for a long time, whether explicitly in the guest surveys or just in the piles of untouched rice that we see in our restaurants. And so this is something that our guests have been asking for. And I think we've been doing a really good job in fiscal twenty five of just checking one issue after another in terms of points of friction for our guests.

[Benjamin Porten, SVP - IR & Business Development at Kura Sushi USA]

So just to give you some additional context in classic Cura speed style. We implemented this in our first restaurant about ten days ago. We now have it in 50 restaurants. And so that speaks to our enthusiasm. But as you can imagine, we don't have a lot of data that we can share with you yet.

[George Kelly, MD & Senior Research Analyst at Roth Capital Partners, LLC]

Okay, that's helpful. Thank you.

[Benjamin Porten, SVP - IR & Business Development at Kura Sushi USA]

Thank you very much.

[Operator]

Thank you. And our final question comes from the line of Matt Curtis with William Blair. Please proceed with your question.

[Matthew Curtis, Associate at William Blair]

Hi, good afternoon. I apologize if I missed in your commentary, but could you just give us the average ticket breakdown in the quarter between price and mix?

[Benjamin Porten, SVP - IR & Business Development at Kura Sushi USA]

Price mix cumulatively was positive 0.8%. Effective price was 4.3%. So mix was negative 3.5 And as we mentioned earlier, mix has been hovering around the negative high single digits for a very long time. We're really pleased to see it stabilize in this low to mid single digit range with the initiatives that we have, like the white rice, the twenty fifth plates, collaborations and giveaways, we're really excited to further drive that down and we think there's even a possibility that we'll be able to see a positive number at some point.

[Matthew Curtis, Associate at William Blair]

Okay, great. Thank you. And then I know the addition of white rice is really recent. But just to be clear, could you tell us what the per plate consumption trends were like throughout the quarter?

[Benjamin Porten, SVP - IR & Business Development at Kura Sushi USA]

I'm sorry, so this was implemented after Q3 and so it wouldn't have any impact on the plates per person consumption in the prior quarter.

[Matthew Curtis, Associate at William Blair]

Yes, but I meant what were the actual per plate consumption trends during the quarter relative to say the second quarter?

[Benjamin Porten, SVP - IR & Business Development at Kura Sushi USA]

So for the last several years, it's been approximately six per person.

[Matthew Curtis, Associate at William Blair]

Okay. Okay, great. Thanks very much.

[Hajime Uba, Chairman, President & CEO at Kura Sushi USA]

Thank you, Mark.

[Operator]

Thank you. With that, this does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time. Have a wonderful day.

Participants

Executives

• Benjamin Porten, SVP - IR & Business Development
• Hajime Uba, Chairman, President & CEO
• Jeff Uttz, CFO

Analysts

• Jeremy Hamblin, Senior Research Analyst at Craig-Hallum Capital Group LLC
• Jeffrey Bernstein, Equity Research Analyst at Barclays Capital
• Zach Ogden, VP - Equity Research at TD Cowen
• Todd Brooks, Equity Research Analyst at The Benchmark Company LLC
• Mark Smith, Senior Research Analyst at Lake Street Capital Markets
• Jon Tower, Director - Equity Research at Citigroup
• Jim Sanderson, MD & Research Analyst at Northcoast Research
• George Kelly, MD & Senior Research Analyst at Roth Capital Partners, LLC
• Matthew Curtis, Associate at William Blair