Kura Sushi USA Today
As of 01/10/2025 16:00 Eastern
- 52 week range
- $48.66
▼
US$122.81
- Target price
- $89.75
Kura Sushi’s NASDAQ: KRUS The stock price retreated following the release of its 2025 fiscal first quarter results, creating a hot buying opportunity for small-cap investors and the restaurant business. The move comes as guidance fell short of expectations and expects growth to slow, but many factors, including first-quarter growth rates and store counts, suggest otherwise.
The likely scenario is that this company continues to outpace growth by 20% or higher, beating full-year guidance by hundreds of basis points. Add to this the fact that this business is as healthy as it gets: it is well capitalized, fully equipped to execute its plans and is poised for success. There is a good chance that the recovery in stock prices will not only match the highs of 2024, but could also set new records before the end of 2025.
Kura Sushi hits the top and bottom lines; Confirms the forecast for 2025
Kura Sushi had a strong quarter, with revenue up 25.2% thanks to an increase in the number of stores and higher sales. Compensation rates were 1.8%, returning to growth after a short period of decline, and are expected to remain positive this year. The number of stores increased by 6 in the quarter and 16 from last year, representing an increase of 26%, so management’s forecast of 15% growth for the fiscal year appears low.
The company experienced pressure on profitability due to growing pains, but much less than restaurant analysts had expected. Revenue leverage and cost controls offset rising wages and inflation, resulting in significant reductions in operating losses. The key details are that restaurant-level operating margins are positive at about 18%, while corporate-level operating losses have narrowed to $1.5 million, down nearly 50% from the prior year. This will allow the company to maintain earnings in 2025 and accelerate earnings growth in 2026 and 2027.
The forecast is moderate compared to analyst consensus reported by MarketBeat, but is unlikely to keep the stock price low for long as it is likely to be cautious. The forecast is cautious due to expectations for retail store growth and store count growth rates of more than 20%. This rate is expected to continue into 2025, management indicated.
Threat of dilution decreases as Kura Sushi’s profitability improves
Kura Sushi trimmed its share count in the first quarter, selling about 800,000 shares to raise $64 million in cash, but the worst is behind it. The sales strengthened the balance sheet, leaving it in a strong position with enough cash to sustain operations for more than a decade at its first-quarter burn rate. Other highlights include zero long-term debt, 50% increased equity, and ultra-low liability. The company’s total liabilities are less than 0.8x equity and 0.5x assets, giving it a strong position and ability to execute on its long-term growth plans. With only 70 locations in the works, we have a long road of growth ahead. Comparable fast food chains such as Chipotle Mexican Grill. New York Stock Exchange: CMG currently operates more than 3,500 locations and plans to double that number.
Analyst reaction to the first quarter earnings news is good. The first changes tracked by MarketBeat are three price target increases that support a moderate buy sentiment rating and highlight a potential recovery in stock prices. The new targets range from $90 to $120, averaging around $103, representing nearly 15% gains from critical support targets and 25% at the high end.
Kura Sushi retreats: uptrend still in place
Kura Sushi’s share price is volatile and shows significant resistance at $100. However, the price action also tends to be upward, showing higher lows and higher highs consistent with an ascending channel. Under such conditions, inventories are likely to rise to a higher peak in 2025 than in 2024; the question is how deep the pullback can be in 2025 before a recovery begins. Since the forecast update, the market has fallen more than 10% and may fall further. The critical support target is near $88.50; a move below this level would be bearish for this market. In this case, KRUS shares could fall to $70 or lower before
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