Sushi chain Kura Sushi (KRUS) recently posted top-and-bottom-line beats, with adjusted EBITDA margins hitting an all-time high. Recent growth has led to the successful launch of six new locations, with several more under construction. The company also expects the rollout of an improved tableside ordering panel. However, Kura saw its stock drop roughly 5% on weaker-than-expected forward guidance. Yet despite the price decline, the stock still trades at a premium. Investors looking for a restaurant stock with above-average growth may find the stock of interest but be prepared to pay for it.
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Expansion and New Growth Initiatives
Kura Sushi is a rapidly expanding, technology-driven restaurant that offers a unique dining experience with its revolving sushi service model. The concept allows patrons to tailor their dining experience by controlling factors like the variety of dishes, portion size, pace, and bill amount. The restaurant has become the largest revolving sushi chain in the U.S.
Six new units were opened during the most recent fiscal quarter, and strong performance from these new openings has validated the company’s strategy of tapping into new smaller market opportunities. This has boosted the company’s confidence in pursuing smaller, high-potential markets to expand overall business potential and allows for improved cost management. KRUS’s new goal is to achieve a 50/50 balance of openings in new and existing markets in the coming years.
Improving Financials
Kura Sushi has released its financial report for the first quarter of FY2025. The company reported overall revenue of $64.5 million, a significant increase from $51.5 million in the first quarter of 2024. Comparable restaurant sales saw a moderate growth of 1.8%, and the restaurant-level operating profit was $11.7 million, or 18.2% of sales.
Adjusted EBITDA was $3.6 million, up from $1.8 million in the previous year’s first quarter, and the operating loss decreased from $2.8 million to $1.5 million. The net loss was also reduced from $2 million in 2024 to $1 million in 2025. Earnings per share were -$0.08, an improvement over last year’s -$0.18 per share.
Looking ahead, management has maintained its annual guidance for the full fiscal year of 2025, predicting total sales between $275 million and $279 million. Opening 14 new restaurants and general and administrative expenses as a percentage of sales are approximately 13.5%.
Long-term Upside
The stock has been trending upward recently, climbing over 58% in the past six months. It trades near the middle of its 52-week price range of $48.66 – $122.81 and shows ongoing negative momentum as it trades below the major moving averages. With a P/S ratio of 3.93x, it trades at a premium to peers in the Consumer Discretionary sector, where the average P/S ratio is 0.90x.
Analysts following the company have been cautiously optimistic about KRUS stock. For example, Roth MKM’s George Kelly, a four-star analyst according to Tipranks’ ratings, recently reiterated a Buy rating and $120 price target on the shares after its Q1 results. He noted the stock’s premium valuation but suggested it was reasonable given the margin trends and long-term unit upside.
Six analysts recently recommended Kura Sushi as a Moderate Buy. Their average price target for KRUS stock is $107.80, representing a potential upside of 27.80% from current levels.
Kura Sushi in Summary
Kura Sushi has made significant strides with record-breaking EBITDA margins and the successful opening of six new locations. As the largest revolving sushi chain in the U.S., Kura Sushi demonstrates robust growth and an innovative approach to dining. While the stock experienced a dip due to weaker-than-expected forward guidance, this tech-forward restaurant continues to show long-term promise, with its stock trading at a premium.
While the company’s ongoing growth efforts and financial performance may merit its higher valuation, potential investors might want to wait for the stock to halt its negative price momentum before establishing a position.
