On Wednesday, Benchmark analyst Todd Brooks revised the price target for Kura Sushi USA Inc . (NASDAQ: NASDAQ:KRUS) to $85 from the previous $100, while continuing to endorse the stock with a Buy rating. The stock, currently trading near its 52-week low of $40.03, has seen a significant 64% decline over the past year according to InvestingPro data. The adjustment followed Kura Sushi's reported financial results for the second quarter of fiscal year 2025, which did not meet the consensus expectations on several key performance indicators due to adverse weather and fire events earlier in the year.
The company's quarterly earnings, released after the market closed on Tuesday, revealed that same-store sales (SSS) were impacted significantly, resulting in a 5.3% decline compared to the anticipated 2.7%. Despite this, Kura Sushi met revenue forecasts with $64.9 million, supported by robust performance from nine new stores launched in the first half of fiscal year 2025. The company maintains strong revenue growth of 21.37% and healthy liquidity with a current ratio of 2.67, as reported by InvestingPro. However, labor costs escalated to 34.8% of sales due to the SSS shortfall, contributing to earnings per share (AEPS) and adjusted earnings before interest, taxes, depreciation, and amortization (AEBITDA) falling below consensus, at $(0.14) and $2.7 million, respectively.
In light of these results, management at Kura Sushi has decided to maintain its revenue guidance for the fiscal year 2025, projecting between $275 million and $279 million. This forecast is based on the expectation of improved SSS from mid-April through July, the return of intellectual property partnerships from May through August, the expedited deployment of a new reservation system, and the strong initial performance of new store openings.
Despite the setbacks, Benchmark's outlook remains positive. The firm cited several factors in maintaining their Buy rating, including ongoing cost mitigation strategies amid a developing tariff landscape, continued consumer strength observed through March, and the successful launch of stores in the fiscal year 2025 class. InvestingPro analysis reveals that analysts expect the company to return to profitability this fiscal year, despite current gross profit margins of 16.83%. However, due to the uncertain tariff environment and its potential effects on consumer behavior, Benchmark has adjusted its fiscal year 2025 and 2026 estimates for Kura Sushi, as well as the target multiple for the company's shares. The revised price target of $85 still indicates a significant potential upside of approximately 100% according to Benchmark's analysis. For deeper insights into Kura Sushi's valuation and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro.
In other recent news, Kura Sushi USA Inc. reported its earnings for the second quarter of fiscal year 2025, revealing an adjusted net loss of $0.14 per share, missing analysts' forecasts of a $0.09 loss. The company also reported total revenue of $64.9 million, which fell short of the $66.3 million forecast. Despite the earnings miss, Kura Sushi's stock saw a positive reaction in aftermarket trading. The company continues its expansion plans with a goal to open 14 new units in fiscal 2025, having already opened 11 new restaurant units. Analysts from firms like TD Cowen and Barclays have expressed interest in the company's performance and future guidance amidst challenges such as weather-related disruptions and potential tariff impacts. Kura Sushi maintains a positive outlook for full-year sales, projecting between $275 million and $279 million. The company is also focusing on innovative IP collaborations and system developments, including a new reservation system that has shown promising early results.
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