Kura Sushi USA Inc Q2 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Jeffrey Bernstein - Barclays PLC - Analyst : On our of your. Unidentified Company Representative Great.

Question: Jeffrey Bernstein - Barclays PLC - Analyst : And then just secondly, on the new markets you're going into from a geography standpoint, any surprises in terms of the reception from the consumer, whether positive or negative. Just curious your learnings in your newest markets since that's such a big opportunity for you as iron ore coal, you would have no silver at this point.

Question: Jeffrey Bernstein - Barclays PLC - Analyst : And so when it rains in California, that that can have an impact on the correct value West Coast comps, yes, margin was pressured relative to at least street expectations on the labor line and the other line both being well above expectation, which drove pressure on the margin. But I get the feeling those aren't necessarily structural sounds like the labor was because of some accelerated new unit openings on the other costs that were some unusual. So just wondering as you think about the restaurant margin for the second half of fiscal 24, what your thoughts are there and maybe what line item you think has the greatest visibility versus the greatest level of uncertainty as we think about the back half of the year restaurant margins. Thank you.

Question: Jeffrey Bernstein - Barclays PLC - Analyst : Absolutely. Thank you guys, very much. Unidentified Company Representative Sure. Thanks, Joe.

Question: Jon Tower - Citigroup Inc. - Analyst : Great. Unidentified Company Representative Thanks. Thanks for taking the questions. Maybe starting off with the the comps in specifically during the period, it's great to see the traffic growth. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 04, 2024 / 9:00PM, KRUS.OQ - Q2 2024 Kura Sushi USA Inc Earnings Call That's awesome. But the price mix implications behind that, you guys moved into negative territory. I know there's not a ton of history here, but I'm curious that would seem to indicate that consumers are perhaps managing their check a little bit differently than in years past. So how is that manifesting or people just getting fewer plates are they pulling less off of the ordering less off of the tablets and pulling more off of the belts. I'm just curious to see how it's showing up in your business.

Question: Jeffrey Bernstein - Barclays PLC - Analyst : Thanks, John.

Question: Mark Smith - Lake Street Capital Markets, LLC - Analyst : And then I'm also curious, any impact that you guys are seeing in California restaurants on labor with a higher faster to minimum wage there so much runoff reopening, but also quarter on quarter sales-oriented tunnel combined that you threw out and I think kind of Q2 to grow that, to my knowledge, not you could rather than asking and PetroBakken Maserati, non-luxury, IgA and renewable portion of the market was not going to have like 30% to the promotional multimodal number on our preopening labor turnover of intangible assets for the sort of the impact of casino provocative chemicals almost better or reverse it in the volatility. Did I miss a single data? And what about I mean, Grace on that in a bit more of the economics of the Macquarie Asset Management, you name it you want to take on certain markets are stable, but you don't notice it on the profitability something I must congratulate you were going to have a methodical. I came up with a very good quarter given the maturity and I won't get copies of our company. So they don't have a home and the covenant. And based on what I have understood lot the stuff kind of continuing to extend credit terms and geopolitical issues continue into that. And that's mainly for Yamana. Finally, negative goodwill assumptions. Unidentified Company Representative So if you look at our Q, you can see that our preopening costs for Q2 are $700,000 higher than pre-opening costs in the prior year's Q2 and the bulk of that $700,000, that's about 1.3% of sales, the bulk of that product, $1,000 labor. So you can see immediately just how big of an impact that the accelerated pre-opening labor did. In terms of the full year, we expect mid-single digit labor inflation, which is what we've said in past quarters, the change in labor is really again, it's really driven by that preopening preopening labor that's compounded by the weather that we saw across our markets. We really were very pleased REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 04, 2024 / 9:00PM, KRUS.OQ - Q2 2024 Kura Sushi USA Inc Earnings Call with the margins that we put up in spite of that. And we have zero concerns in terms of returning to normalcy as we enter Q3, as we've mentioned we have a lot of tailwinds and we think we know that the elevated labor from the last first due to things that were either out of our control, whether or we're pleased with, which is that we were able to open our restaurants here. And so yes, we're pretty happy.

Question: Mark Smith - Lake Street Capital Markets, LLC - Analyst : I put it in another category, I don't know, going into a holiday month, Amazon, Q2, Q3 to Q4. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 04, 2024 / 9:00PM, KRUS.OQ - Q2 2024 Kura Sushi USA Inc Earnings Call Unidentified Company Representative And even that, Greg, with your question, Tom, in terms of the cadence, we just broke down, broke ground on one of them. So it's very early on in terms of the construction life cycle, the remaining units, we expect about an even split between Q3 and Q4, we think 30 to 14 units is a reasonable expectation, which is why that we gave guidance guidance.

Question: Matt Curtis - William Blair & Company, L.L.C. - Analyst : Hi, good afternoon. You guys ran a promotion for your rewards members, but I think with two visits in December, you've got to give them a 20% coupon valve in January. I was just wondering if you could tell us about how much of the traffic benefit of that one that's delivering for you or what redemption rates were like? And then I guess, relatedly, whether you're planning to run anything like this regularly going forward?

Question: Jeffrey Bernstein - Barclays PLC - Analyst : Would you mind telling us what the weather penalty was for the quarter? Unidentified Company Representative I'm sorry, could you repeat that?

Question: Mark Smith - Lake Street Capital Markets, LLC - Analyst : Mental capacity, if he'd like to add that? I have you gotten your cost you nothing about Booker, happy to come. And also, can you give us a lot of credit, like I know on October 14th out of the gate? Because if I go into the unlocking of going out and one-off, and it can cause significant amount of impact on a particular arrangement. Unidentified Company Representative Late October, January and February, we had about four operating days each that were very heavily impacted January, largely Texas, the Midwest and some of these coastal California was hit during February, but yes, about eight days.

Question: Jeffrey Bernstein - Barclays PLC - Analyst : Thank you. And then you talked about Dragon Ball being the promotion that's coming out of this spring. I guess you have spice family that's been in place since I think March first. Could you remind us what promotions are happening over this timeframe and how successful they were last year.

Question: Jon Tower - Citigroup Inc. - Analyst : Okay.

Question: Jeffrey Bernstein - Barclays PLC - Analyst : First Okay, understood. Thanks very much.

Question: CJ Dipollino - Craig-Hallum Capital Group - Analyst : Hi, everyone. It's CJ on for Jeremy Hamblin. I wanted to touch on labor costs one more time on just see if you were able to give a little more color kind of quantify on the penalty from adverse adverse weather.

Question: Jon Tower - Citigroup Inc. - Analyst : Yes.

Question: Mark Smith - Lake Street Capital Markets, LLC - Analyst : What's the typical time to open from that point, decent opening because you guys must be verified, they go delinquent is typically about five months. I'll put it up a couple of I guess the question is, I know that's one of the spectrum of tumors and you take your targeted strategy that territories in whatever environment is obviously, can you bucket the hematin So it's been about five months historically for the last couple of quarters, we've seen that tighten a little bit with inspections at the end of construction going a little smoother. Unidentified Company Representative And so it's been closer to four months and five months, but our base expectation is five months.

Question: Jon Tower - Citigroup Inc. - Analyst : Thank you. Unidentified Company Representative Very helpful. You actually.

Question: George Kelly - ROTH Capital Partners, LLC - Analyst : Clearly, thanks for taking my questions. So first one is about Dragon Ball. And clearly you guys seem super excited about that partnership. And I understand big brand, but I guess the question is, are you also you've done so many of these now, I'm curious if your strategy around monetizing big partnerships like that if that's changed at all? And basically like what are you kind of given the history and what you've seen with these big deals before? Is there at a sort of an ability now to be more aggressive in your monetization plan?

Question: George Kelly - ROTH Capital Partners, LLC - Analyst : Understood. And then second question on the unit growth and taking your guidance up again. I guess at the midpoint for expected openings this year. Is it all about permitting or are there any other factors that explain you raising that a couple of times now and then the second part of that question is, if you look out beyond this year, is it fair to assume that the 20% growth target that you've put out in the past is that is that still a good number to use? And those are my questions. Unidentified Company Representative Thank you.

Question: Mark Smith - Lake Street Capital Markets, LLC - Analyst : Now put us in the customer margin Tympany, Michael Temple, and you can calculate them if any, you can put on a hemoglobin under a holdover for quality document was identical number. I know you might have already upgraded the guidance that I know you don't even see them for the taking on of Moderna. I'm not showing any verticals. I'm not going to be able to set up when it comes in. Unidentified Company Representative I think given that we've already opened 10 shorts and we have five under construction, just looking at historical patterns in terms of permitting, how construction goes, we think that 13 to 14 reserve I really care about. Obviously there's opportunity potential to go beyond that at this point with obviously you have six months left in the year. That's the 13 to 14 where we feel good about. And also to your point George, about the question about the acceleration of the team and really what drove that. Germany did get a little bit easier this year, obviously compared to last year and the year before. I think the other piece that really helped is that while our management pipeline has always been strong, one of the things that I committed to when I came to the Company was to reinvest back in the Company in areas where we're going to get a very good return.

Question: Jeffrey Bernstein - Barclays PLC - Analyst : Excellent.

Question: Jeffrey Bernstein - Barclays PLC - Analyst : No, no, no, no, no, no, no, no reason to move from moving forward.

Question: Jeffrey Bernstein - Barclays PLC - Analyst : We'll move to the phone number. We forward No, we'll pass back on to the sorry.