Kura Sushi USA (NASDAQ:KRUS) executives struck an optimistic tone on the company’s fiscal first-quarter 2026 earnings call, pointing to sequential improvement in sales trends late in the quarter, ongoing unit development, and cost initiatives aimed at improving labor leverage and general and administrative expenses. Management also discussed tariff-related margin pressure, updates to its marketing and reservation strategy, and reiterated full-year guidance.
First-quarter results and sales trends
Total sales in the fiscal first quarter were $73.5 million, up from $64.5 million in the prior-year period. Comparable restaurant sales declined 2.5%, driven by 2.5% negative traffic and flat price and mix, according to CFO Jeff Uttz. Management said the comp performance was better than what it had expected previously, citing a stronger November and momentum that continued beyond the end of the quarter.
During the Q&A, management said it expects positive comparable sales in Q2 and reiterated confidence in achieving flat to slightly positive comps for the full year, while declining to provide specific expectations for the price-and-mix component given only two months of post-price data.
Margins pressured by tariffs and deleverage
Kura Sushi’s profitability metrics weakened year over year, which executives attributed primarily to tariffs and sales deleverage in several expense lines.
- Food and beverage costs were 29.9% of sales, up from 29.0%, which management attributed to tariffs on imported ingredients.
- Labor and related costs were 32.5% of sales, down from 32.9%, reflecting pricing and operational initiatives, partially offset by sales deleverage and labor inflation.
- Occupancy was 7.9% of sales, up from 7.4%, due to sales deleverage.
- Other costs were 16.1% of sales, up from 14.5%, due to sales deleverage and higher marketing-related costs. Management clarified that much of this pressure was tied to tariff impacts on promotional items such as Bikkura Pon prizes and giveaways sourced from China, rather than a major shift in brand advertising spend.
- G&A was 13.0% of sales (including 30 basis points in litigation accruals), down from 13.5% last year. CEO Hajime “Jimmy” Uba said aggressive cost management reduced G&A as a percentage of sales by 80 basis points on an adjusted basis.
The company reported an operating loss of $3.7 million compared to an operating loss of $1.5 million a year ago. Net loss was $3.1 million, or $(0.25) per share, versus a net loss of $1.0 million, or $(0.08) per share, in the prior-year period. Adjusted EBITDA was $2.4 million, down from $3.6 million.
Restaurant-level operating profit margin was 15.1% versus 18.2% in the prior-year quarter. Management reiterated its expectation for full-year restaurant-level operating profit margins of approximately 18% and said its guidance already contemplated the weaker first-quarter margin.
On tariffs, executives provided additional detail about timing and magnitude. Uttz said the company typically buys four to six months of product, meaning tariff changes would take time to flow through results. Management said its full-year cost-of-goods outlook of about 30% includes a tariff impact that Uttz described as “pretty significant” at roughly 200 basis points, partially offset by supplier negotiations. Management also said tariffs had a 40–50 basis point impact on other costs as a percentage of sales, largely tied to promotional items.
Development pipeline and liquidity
Kura Sushi opened four restaurants during the quarter: Arcadia and Modesto in California, and Freehold and Lawrenceville in New Jersey. The company has 10 restaurants under construction, including units in Tulsa and Charlotte, which Uba described as new markets for the company. Management expects to open one additional unit in Q2 and the remainder in the back half of the year, maintaining its target of 16 new units in fiscal 2026.
Uttz said the company ended the quarter with $78.5 million in cash, cash equivalents, and investments, and no debt.
Asked about the company’s recently filed shelf registration, Uttz said it was primarily “good corporate housekeeping” to be prepared, while noting the company still has roughly $75 million in cash and investments and is “pretty liquid, pretty strong.” He added that the company would monitor factors including share price and potential need for capital.
Marketing, loyalty, and operational initiatives
Management highlighted a collaboration with Kirby, timed with the release of Kirby Air Riders for Switch 2. Executives said Kura Sushi introduced IP-themed “Mr. Fresh” domes and themed touch panels for the collaboration, which were “very well received.” The company said Kirby runs through the end of January, followed by Sanrio in February and Jujutsu Kaisen in March and April to coincide with a new anime season.
In discussing November’s performance, management pointed to several drivers, including a second One Piece giveaway, a gift card promotion, and a Kura Reserve limited-time offering featuring a Sakura Bacon item, which executives said performed particularly well.
The company also described changes to its reservation strategy, including decoupling its reservation system from its rewards program to reduce friction for new users. Investor relations and system development SVP Benjamin Porten said more than half of visits by rewards members are being done through the reservation system, and the company began marketing reservations more heavily after decoupling in late December. Porten said early data was limited but described usage as “sticky” once customers try it.
On loyalty, Porten said the company has reached 1 million rewards members, or 1.7 million including newsletter members. He added that, for a two-person ticket, rewards members spend about $6 more per person and visit “more than twice or even triple” a non-member.
Operationally, management said manufacturing of robotic dishwashers is on schedule, with installations expected to begin in Q3 and most of the 50 eligible existing restaurants retrofitted by fiscal year-end. However, executives said the fiscal 2026 margin guidance assumes only minimal benefit from robotic dishwashers this year, with more impact expected in fiscal 2027. Separately, management reiterated confidence in improving labor costs by 100 basis points in fiscal 2026, citing initiatives such as the reservation system, new touch panels, and Mr. Fresh domes, along with leverage from improved sales trends.
Reiterated fiscal 2026 guidance
Uttz reiterated the company’s fiscal 2026 outlook:
- Total sales: $330 million to $334 million
- New unit openings: 16 (annual unit growth rate above 20%)
- Average net capex per unit: approximately $2.5 million
- G&A as a percentage of sales: 12% to 12.5%
- Restaurant-level operating profit margin: approximately 18%
Management said the first quarter provided a foundation heading into what it described as easier comparisons in Q2 and Q3, while acknowledging ongoing tariff pressure as a key headwind in costs.
About Kura Sushi USA (NASDAQ:KRUS)
Kura Sushi USA, Inc operates Japanese‐style revolving sushi restaurants across the United States. The company’s concept centers on delivering a modern sushi dining experience by combining fresh ingredients with automated conveyer belt and plate‐return systems. Guests can choose from a broad menu that includes nigiri, sashimi, maki rolls, tempura, udon noodles and chef‐inspired seasonal dishes, all served directly from the conveyor belt or ordered on tabletop touchscreens.
Each restaurant integrates patented technology to ensure food quality and operational efficiency.
