Gas prices and soccer steal traffic from Kura Sushi
Gas prices and the World Cup impact Kura Sushi's traffic and revenue outlook.
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Kura Sushi has experienced a 5% decline in customer traffic and a downward revision in its revenue outlook due to high gas prices and competition from the World Cup. Despite these challenges, the chain opened seven new restaurants in the last quarter and is on track to finish the fiscal year with a total of 16 new locations.
Why It Matters
The decline in traffic may compress available territories for Kura Sushi franchisees in high gas price areas, affecting unit economics. The construction delays also highlight potential operational challenges that could impact future expansion plans.
Kura Sushi, a prominent conveyor-belt sushi chain in the U.S., has reported a 5% decline in customer traffic for the three months ending May 31, attributed primarily to high gas prices, particularly in California where many of its locations are situated. Nationally, gas prices exceeded $4.50 due to geopolitical tensions related to the Iran war and disruptions in the Strait of Hormuz. Concurrently, the excitement around the World Cup has diverted consumer attention, further impacting foot traffic despite Kura raising menu prices to offset some revenue losses.
The company's same-store sales fell by 0.4%, prompting Kura to revise its revenue forecast for the fiscal year ending in August. The revised outlook anticipates total revenue between $330.5 million and $331.5 million, a reduction from previous estimates of $333 million to $335 million. Meanwhile, Kura does project positive same-store sales for the year, indicating a potential recovery as gas prices decrease.
Additionally, Kura faced unexpected construction delays affecting four new restaurant openings, resulting in an estimated loss of six months' revenue. Three of these delays were tied to fire inspection issues, which have further strained Kura's growth trajectory. Despite these challenges, the company's restaurant-level operating profit saw a marked improvement, increasing by 90 basis points to 19.1%. This growth was partly fueled by operational efficiencies that improved labor costs relative to sales, aiding Kura in offsetting higher costs of goods sold. The company now anticipates restaurant-level profits of 18.5% for the year.
