Financing

Kura Sushi USA sees a rise in traffic, but profits remain elusive

The fast-growing sushi chain projects that it will be helped later this year by a major change in California's wage requirements.
Kura Sushi
Kura Sushi's unusual serving process. | Photo: Shutterstock

A 3.3% upswing in traffic boosted same-store sales for Kura Sushi USA by 3.8% during the first quarter ended Nov. 30, but the gains failed to push net profits into positive territory, the 56-unit chain said Thursday.

The U.S. subsidiary of the global revolving sushi brand posted a net loss for the quarter of $2 million, compared with a deficit of $2.1 million a year ago. Management attributed this year’s shortfall largely to the opening of four units during the three months. Kura has seven stores under development, executives said.

EBITDA, or earnings before interest, taxes, depreciation and amortization, improved to $1.8 million, from a year-ago level of $600,000. Restaurant-level margins rose by more than a percentage point, to 19.5%.

Management voiced the usual optimism that public companies show during conference calls with analysts, with leadership stressing the Q1 rise in customer visits. “As you know, listening to conference calls still throughout the year, very few concepts have been able to have positive traffic,” Kura SVP Benjamen told the analysts who track his company.

CEO Jimmy Uba said the company is particularly bullish about its prospects in California because of the new minimum wage that will take effect there for fast-food employees on April 1. The pay floor is scheduled to rise that day to $20 an hour just for workers in quick-service restaurants with at least 60 units nationwide.

Uba contended that the increase would force the state’s fast-food restaurants to raise their menu prices to cover the nearly 30% leap in the fast-food minimum wage, narrowing the price differential with full-service places like Kura.

“We see this as a meaningful opportunity to grow market share,” Uba said. “Up until now, the conversation has really been, ‘Do we go to Kura Sushi or do we go to other casual dining places?’ Now it's, ‘Do we get a combo meal at the burger place, or do we get Kura Sushi?’”

The sushi chain aims to open at least 14 restaurants during the current fiscal year.

Overall revenues for the company rose during Q1 to $51.5 million, a rise of 31%.

Kura Sushi USA currently has restaurants in 16 states and the District of Columbia. Its parent company, 40-year-old Kura Sushi Inc., has more than 500 units globally.  The U.S. operation began in 2008.

The Kura Sushi concept is a tech-based sushi bar where customers pick small plates of Japanese fare off a conveyor that runs along the counter.

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