Kura Sushi Stock Plummets on Disappointing Earnings Report

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Kura Sushi (NASDAQ: KRUS) stock experienced a significant decline in Wednesday’s trading session, ending the day substantially lower according to data from S&P Global Market Intelligence. This downturn followed the release of the company’s financial results for the third quarter of its 2024 fiscal year, which concluded on May 31.

Despite reporting revenue figures that aligned with Wall Street’s expectations, Kura Sushi revealed non-GAAP (adjusted) earnings that fell short of market forecasts. This shortfall has raised concerns about the company’s profitability moving forward. Kura Sushi’s financial performance in the third quarter showed a breakeven outcome on an adjusted basis, whereas analysts had anticipated a modest adjusted profit of approximately $0.01 per share.

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The company managed to boost its revenue by roughly 28% year over year, reaching approximately $63.1 million. However, this revenue growth was overshadowed by deteriorating margins, which have sparked increased bearish sentiment among investors. Over the first nine months of the current fiscal year, Kura’s restaurant-level operating margin dropped to 19.7%, compared to 20.9% during the same period in the previous fiscal year.

Looking ahead, Kura Sushi aims to wrap up the annual term with the opening of 14 new restaurants, exceeding the company’s initial guidance of 13 new locations. This expansion continues despite facing substantial cost pressures, including rising ingredient and labor expenses. For the fiscal year 2024, Kura Sushi has projected its sales to fall within the range of $235 million to $237 million. Achieving the midpoint of this target would signify a roughly 26% increase from the $187.4 million in sales recorded in the previous fiscal year, which ended on August 31, 2023. Previously, the company had forecasted sales between $238 million and $243 million for the year.

The recent financial results and outlook have prompted questions about whether investors should consider purchasing Kura Sushi stock at this time. Amidst these considerations, it’s notable that the Motley Fool Stock Advisor analyst team did not include Kura Sushi among what they identify as the 10 best stocks for investors to buy now. This context adds to the scrutiny surrounding Kura Sushi’s stock in light of its current financial challenges and market performance.