Kura Sushi at 45th Annual William Blair: Strategic Growth and Challenges

On Tuesday, 03 June 2025, Kura Sushi USA Inc. (NASDAQ:KRUS) presented at the 45th Annual William Blair Growth Stock Conference, discussing its strategic growth and challenges. The company highlighted its rapid expansion, unique market position, and technology-driven approach. While optimistic about growth, Kura Sushi acknowledged challenges such as tariffs and labor inflation.

Key Takeaways

• Kura Sushi has expanded to over 70 restaurants across 20 states and DC since its IPO in 2012.
• The company is implementing a reservation system to enhance customer experience and reduce wait times.
• Financially, Kura Sushi is strong with $100 million on the balance sheet and a $45 million credit line.
• The company targets maintaining a 20% unit growth rate and 20% restaurant level margins.
• Kura Sushi plans to expand into new markets such as Tulsa, Boise, and Oklahoma City by fiscal year 2027.

Financial Results

• Kura Sushi holds $100 million on its balance sheet, supported by a $70 million capital raise in November 2024.
• The company has a $45 million credit line with Accura Japan, aiming to avoid further capital raises by maintaining 20% restaurant level margins.
• Tariffs are expected to impact COGS by 20 basis points, yet proactive measures may position Kura Sushi’s COGS as industry-leading.
• Labor inflation is projected to return to low-to-mid single digits in Q4, aided by labor-related initiatives.

Operational Updates

• Over 60 units now feature a live reservation system to improve wait times.
• A new half-rice option is being introduced to reduce waste and encourage more plate consumption.
• The company is addressing customer feedback by simplifying the Bikkura Pon prize system and improving dome design.

Future Outlook

• Kura Sushi aims for a 20% unit growth rate, with a focus on a balanced expansion between new and existing markets by fiscal year 2027.
• The company is targeting top 20 DMAs in the US, with successful expansion efforts in smaller DMAs like Bakersfield.
• Plans include rolling out new dish machine robots and touch panels to enhance front-of-house operations.

Q&A Highlights

• The company noted that areas with a higher proportion of bachelor degree holders are key to success.
• Customer complaints about wait times and the Bikkura Pon prize system are being addressed through new systems and adjustments.

For a deeper dive into Kura Sushi’s strategies and future plans, refer to the full transcript below.

Full transcript - 45th Annual William Blair Growth Stock Conference:

Sharon Zackfia, William Blair, William Blair: Okay. So I’m Sharon Zackfia, William Blair. Really happy to have everyone here to see Kurosushi as we enter the luncheon time frame. We’re gonna do a fireside chat format. I’ll be standing because as you see, there aren’t enough tables not long enough for all of us.

But before I hand the put the mic over to Ben, who’s going to give the the kind of brief overview before the fireside chat, I do wanna welcome the team. So Jimmy Uba, who’s president and CEO Jeff Utz, CFO, and Ben Porton, who’s the VP of everything, but mainly investor relations and systems development. So, Ben, if you wanna give a brief overview for the crowd, and then I will go ahead and get into the q and a.

Jimmy Uba, President and CEO, Kura Sushi: Perfect. Thank you so much, Sharon. Can everybody hear me? Great. Thanks so much for coming today, especially during the lunch break.

We very much appreciate it. For the people that are new to our story, Kura Sushi began as the wholly owned subsidiary of Kura Japan. We opened our first restaurant in The United States in 2009 in Irvine, California. We went public in ’2 in February. We had restaurants at that point.

Today and we were in four states. Today, we are in 20 states plus DC and have over 70 restaurants. And so we’ve really quite rapidly grown over the last five years. We’ve been one of the more exciting growth stories, among the publicly traded restaurants, being able to maintain that 20% plus unit growth every year for the last five years. One thing that’s very unique about ourselves would be just the the nature of the sushi industry being extremely fragmented.

The top two players, which would be ourselves and then Nobu, control to serve over 2% of revenue, and so it’s effectively all independently owned restaurants. There are no major chain players besides ourselves, and we’ve just been, cleaning up, so to speak, over the last several years. Another part that’s really unique about us is how tech driven that we are. So we’re able to leverage our relationship with Korea Japan to punch far above our weight as a 70 some unit chain. So right now, what we’ve been working on would be the implementation of the reservation system, which we think is a very meaningful opportunity in terms of traffic growth.

And then the next thing that we have in our pipeline would be the Ishrobot, which Sharon is finally, you know, finally coming. I I’m really, really happy about that. And so just, given the uniqueness of the space and the opportunity as well as the uniqueness of our ourselves as a company and how tech driven we are, we’ve been we’ve been having a fun time since being a publicly traded company.

Sharon Zackfia, William Blair, William Blair: I think one of the things that, you do very well is that you have these advantages from automation, and then you’ve reinvested that into pretty low price points for the consumer. So can you talk about kind of the value proposition at Cura and how you think about what the right gap is relative to the competition, which is primarily independent? Sure. I’m happy to

Jimmy Uba, President and CEO, Kura Sushi: answer this question. But please allow me to speak in Japanese. He is gonna translate my Japanese into English. So we we perform, customer studies annually. We also, as part of our checkout process, have a very simple three question survey, which gives us a ton of visibility pretty much in real time in terms of how guests are experiencing Kura.

And the value scores, we’re we’re very pleased to say, remain extremely high or or actually the highest they’ve ever been. Part of that would be the incredible efforts made by our supply chain department. They’re they’re always traveling around the world trying to secure the best possible ingredients at the best possible price. One very visible thing that we did recently was switch over our LTO format from per monthly discovery, to per reserve, which is less frequent and higher quality. We we’re our expectation is that we’ll be able to build more excitement about this, but we’ve done two.

We’ve got one going right right now. I very much encourage you guys to go try the soft shelled shrimp during our current LTO. Our previous LTO, we offered three pieces, three different cuts of bluefin tuna for under 3, under $6. And so I don’t think you’d be able to find that. I don’t think you’d be able to find a blue a p a single piece of bluefin tuna under $6 at a typical restaurant.

And so being able to offer free really speaks to the uniqueness of our brand. We’re only able to do this because of the incredible efficiencies that we have from our automation. We’re able to reinvest that, as you mentioned, back into our food quality. In terms of the price gap, we we do menu analysis of our direct competitors, other sushi restaurants across the core markets. And the area where we like to be is about 50%.

And so if, you know, we’re charging $3.50 for two pieces of tuna, the other sushi restaurants in our areas typically charge 7 or $8 for the same.

Sharon Zackfia, William Blair, William Blair: I I wanted to touch on IP collaborations because the the comp trends over the past year have been maybe a little bit more volatile than normal in part due to the IP collaborations and the and the timing of those. Can you talk about the strategies that you have in place to help kind of lessen that volatility going forward and maybe help us understand what the optimal frequency is of IP collabs going forward?

Jimmy Uba, President and CEO, Kura Sushi: Thank you, Anna. Sure. So I’m exceptionally proud to say that as of May, so now through the end of the fiscal year, we have constant rolling IP collaborations. And for the next fiscal year, we actually have seven or eight against the typical five or six. The seven or eight would be a record for us.

So in terms of eliminating comp lumpiness, really, the the first and best thing we could do is fill the calendar. The second is we know that the first month of a campaign tends to outperform the second month of a campaign, and so the seven to eight gets us more first months than second months. And then thirdly would be the quality of campaigns, but those remain somewhat unpredictable, which is one of the reasons we’re so happy to just, you know, have the seven to eight, which we know will outperform agnostic of the quality of the properties. We’re looking to fiscal twenty six, I am we’re all very excited from a comp perspective given the IPs that we have lined up. And thinking about this year, we had four to five months with no IPs, and so that makes for naturally easier comparison.

We also have the benefit of the reservation system, which, as we mentioned previously, think we we think could be, like, a a a very, very meaningful traffic opportunity.

Sharon Zackfia, William Blair, William Blair: I’m gonna take the bait on the reservation system since it’s been mentioned twice. Can you talk about where you are in the rollout of the reservation system? And you’ve talked about benefiting results. Can you kind of help the audience understand why you think that will actually help you generate, higher volumes?

Jimmy Uba, President and CEO, Kura Sushi: Yes. So we’re actually almost done with the reservation system. The majority of our our system, over 60 units, have the reservation system live. As as soon as we understood the potential, it was a race to get them live system wide so that we could capture the major q four opportunity. Summer is always our busiest season, and we really want to get the most out of it.

And I’m incredibly grateful and proud of the work that everybody’s done in terms of making this possible. You you sort of talked about value before. And, historically, we thought about value in terms of money, but we also we realized that value is also very much a function of time. And so for people that haven’t been to one of our restaurants on a weekend, it’s extremely typical to have a one to two hour wait. And prior to the reservation system, we had a wait list, but you couldn’t join until there was already a wait, at which point you would be thirty minutes to an hour and thirty minutes, making it basically impossible to plan anything before or afterwards.

And so it wasn’t, you know, is this meal worth $28? It’s is this meal worth my Saturday? Which is a completely different question. And now with the reservation system, that’s taken off the table completely. We’re the only publicly traded restaurant that has to deal with that two step decision making process where where it’s not just do I wanna go to that restaurant.

And now with the reservation system, that’s really the only decision they have to make. And so we know that it’s already benefiting our guests when they know that they can come and they’ll be seated within ten ten minutes or so when they expect to be seated versus, you know, maybe sixty minutes after they arrive. And we’re able to guide people to better fuller periods because they have more visibility on when it’s gonna be you know, when they’ll be able to actually be seated.

Sharon Zackfia, William Blair, William Blair: Are you seeing any excuse me. Are you seeing any benefit in the shoulders of the peak periods with the reservations?

Jimmy Uba, President and CEO, Kura Sushi: It’s early, but I would expect absolutely yes. And I’m excited to report more on the upcoming call.

Sharon Zackfia, William Blair, William Blair: Awesome. I I don’t want Jeff to have too easy of a time up here, so I’m gonna ask you about tariffs, Jeff, because it wouldn’t be 2025 if we didn’t talk about tariffs. So on your last earnings call, you it was kind of in the the midst of a lot of new news about tariffs. Can you kind of talk about today what your thought process is on tariffs and the anticipated impact? I think on the call, you mentioned 60% of your baskets sourced overseas.

I think much of that from, Asia and Japan.

Jeff Utz, CFO, Kura Sushi: Mhmm. So when we had our call, it was on, I think, April 8, and the announcement was April 2. So it was only six days in, so we didn’t have a lot of information at that time. We did tell people that we’ve been having conversations with our suppliers. They’ve been very open to sharing tariff costs and not passing all of it through to us.

We’ve continued with those conversations. Right now, because it’s such a moving target, we haven’t seen much more than, say, 20 basis point impact to COGS as from the tariffs, and we’re gonna continue those conversations. It’s actually turned out pretty favorable for us recently with the announcement of the the China tariff going down so much where our our main seafood buyer called me up and said, I’m just gonna go buy a bunch. We buy one particular seafood item from China. That’s one of the only things we buy from China.

He went and bought a bunch and stocked us up. So we’re sitting pretty good there as it relates to COGS. And one thing when you think about our cost of goods sold too, when I joined the company three years ago, we were at about 30% cost of goods sold. Then the bar kinda became 29 and a half, low 20 nines. And then we always look at each other and say, we gotta be in the 20 eights.

So we’ve done

Jimmy Uba, President and CEO, Kura Sushi: a lot of

Jeff Utz, CFO, Kura Sushi: really good work over the last three to four years in bringing our cost of goods sold down and positions us in a pretty good spot that if tariffs do go higher than we anticipate, that our cost of goods sold number is still gonna be one of the best in the industry.

Sharon Zackfia, William Blair, William Blair: I’m assuming that some of the opportunities you’ve had to talk with your suppliers are unlike what your mom and pop competition would be able to execute. So when you say, like, that 20 basis point impact for you, do you have any kind of read on what the broader space is seeing from a tariff impact standpoint?

Jeff Utz, CFO, Kura Sushi: I haven’t. I mean, certainly, our purchasing is a little bit because it’s all, you know, primarily seafood. And a lot of times, the a certain fish doesn’t swim all over the world. You have to get it from a certain place. So our our supply chain is a little bit different than a lot of companies, and I haven’t heard too many numbers out there.

People are because it’s just still such a moving target right now. But I’m happy with our progress and what with the relationship that we have with our vendors, and we can sit there and say, look. We really need you to share this with us, not push everything through to us. And our two biggest suppliers is an absolutely. So we’re we’re in a very good position going forward in case they go north of where we want them to be.

Jimmy Uba, President and CEO, Kura Sushi: Yeah. We’re we’re also even beyond just negotiations with the vendors, we’re also taking operational measures to address potential elevation in in COGS as a percentage of sales. One thing that’s unique about us is we sort of determine what people will eat by putting by choosing what goes on the belt, and we can guide guests towards better margin items that we know are still, you know, very popular, but that allows us to reduce the frequency of more expensive items or make those order only. They’re still available so people could come for those specific items. Their their experiences have impacted, but it does allow us to, you know, at least partially offset elevated costs.

The other is, I’m extremely excited to announce this, is we’re we’re now in the process of rolling out or introducing a half rice option, which, it it I’ve seen a lot of, wasted rice in the past. But even beyond that, you know, it’s exciting because people will be able to eat more plates. And so that is something that I’m extremely excited about. And, also,

Jeff Utz, CFO, Kura Sushi: we can stick on tariffs for one second. Another piece that we look at is tariffs, not only our cost of goods sold and our supply chain, but also our construction costs. And we talked about on the last call that we had in April that in a very worst case scenario, our construction costs would go up three to four hundred thousand dollars. And our average build out per unit right now is about 2 and a half million dollars. However, in that 2 and a half million dollars, which is what we’re running right this year, if you pull out just three restaurants, which are somewhat anomalies, there’s two union projects and there’s one pad site, which is a conversion from retail.

It was actually a bank. They had to take out the vault and do a bunch of extra work that we typically don’t have to do. If you pull those three restaurants out, our average build out is $2,300,000. So even if we do see a worst case scenario of, say, 300,000, we’re still only at 2.6, which is just barely over where we, you know, where we’ve always talked about the 2 and a half million dollars. And even at that build out cost, we’re still confident that we’re gonna be above a 25, somewhere between the 25 and the 33% cash on cash return.

Sharon Zackfia, William Blair, William Blair: I wanted to also delve into labor, because the high single digit labor inflation that you’re seeing is a bit kind of higher than than what we’re hearing more broadly. Mhmm. I know you have some some geographic concentration in certain regions. So can you talk about, you know, if that has been a surprise to you that it’s up that much this year or if you’re seeing a concentration in in specific areas or specific skill sets that’s really driving that?

Jimmy Uba, President and CEO, Kura Sushi: So the the high single digit labor inflation was a surprise to us. We’re typically accustomed to low to mid single digits. In terms of the driving factor, we’d really just be being competitive with the market. And, you know, we’re paid what we had to to make sure that our restaurants were fully staffed. But, having gone through q three entering q four, our expectation based off, you know, the trends that we’ve seen is a return to that low to mid single digit labor inflation.

So we’re really pleased, for that high single digit was a momentary. We’re very optimistic about q four labor, especially because all of the labor related initiatives that, we’ve been working on for the past year plus, the impact is gonna be that is much more visible during high high sales volumes periods. And so, for instance, last at the at the close of last year, we were able to streamline our positions from, say, five to four positions or four to three positions. And for quarters one through three, you know, it’s pretty much only the the weekends where you have enough volumes to be able to to justify that that consolidation. But for the summers, you can do it seven days a week.

And so you get the the full impact of that. We have the new Mr. Freshes, the new, the new touch panels, and the new reservation system, all of which meaningfully simplify front of housework. And so, we’re we’re really, really excited to see the fruits of our labors on the labor line.

Sharon Zackfia, William Blair, William Blair: I I guess given that, can you talk about your confidence in hitting a 20% unit level margin this year?

Jimmy Uba, President and CEO, Kura Sushi: So, 20% is our goal, and that’s not just true for this year. It’s been true for past years and true for future years. We’ve spent some time talking about all the tech initiatives that we have and how that’s helping us manage labor. And even beyond that, we’ve got a lot of stuff coming in the pipeline. Like, fiscal twenty six will be the first restaurants that have the new, dish machine dish robots.

And so regardless of, you know, labor inflation broadly, we know that we’re always gonna be able to come out better than our competitors or or, you know, our peers just because we have all these initiatives that are, you know, truly unique to us.

Sharon Zackfia, William Blair, William Blair: I I wanna talk about new unit expansion because, clearly, that’s the biggest driver of future value creation for the company. Yes. And I think, the class of ’24, if I’m not mistaken, was one of your best classes ever in terms of new unit performance. Can can you talk about if there was any common underlying denominator that really helped that class or if you’re starting to see burgeoning brand awareness or how we should think about that outperformance you saw last year?

Jimmy Uba, President and CEO, Kura Sushi: So I I think we might be talking about fiscal twenty five. Fiscal ’20 ’5 is an exceptionally strong year. The biggest reason would be that we’re finally able to capitalize on some of the investments that we’ve made over the last five years. And so as I mentioned, we’re in 20 plus rest 20 plus states even though we’re only 70 some restaurants. And so if you look at our map, you know, an uncharitable description would be looks like we took a shotgun approach, but this is actually very measured where we wanted to be able to identify the greatest pockets of opportunity as quickly as possible as opposed to relying on just a hub and spoke model where your geographic findings are a function of time relative to how close you are to headquarters.

And so when we opened up the Pacific Northwest A Couple Years ago, we we realized immediately just how meaningful of an opportunity it is. And that made us extremely hungry to open up locations in the Pacific Northwest, but also very choosy because we didn’t wanna waste, you know, this amazing opportunity on b level sites. And so Bellevue has been our top performer for years, but because of how selective we’ve been, it’s only fiscal twenty five that we started opening up that market. And this year, we opened up three in the Pacific Northwest, our first in Oregon and two more in Washington, and all of those are performing amazingly. And so it’s really just being able to use everything that we’ve learned over the last several years.

Jeff Utz, CFO, Kura Sushi: And, also, excuse me, for some context on our fiscal year for those that aren’t familiar, we’re in August 30 first year end. So we just we just started q four on June 1. So,

Sharon Zackfia, William Blair, William Blair: when you think about the the markets that you target for Kura, because you you took that deliberate shotgun approach. And what are the what what correlates the best with where you perform well in terms of demographics, psychographics, density?

Jimmy Uba, President and CEO, Kura Sushi: Do you wanna answer? Sure. Well, really, the the single biggest predictor would be the proportion of bachelor degree holders and above in the surrounding area that, you know, ties pretty closely with with household income. About half of our guests earn more than a hundred thousand dollars, and so, you know, that that certainly works in our favor when there’s macro pressure. One, in terms of really the way that we approach site selection post IPO, we looked at all the the the top 20 DMAs in The United States.

We wanted to lock those down, establish first mover advantage, and build a defensive mode against any potential competitors. And that is part of the process that allowed us to identify, you know, places like, Fort Lee being, you know, the first East Coast location. We’ve opened up East Coast on the strength of that, and now we’re opening up with the Pacific Northwest on the strength of, Bellevue. In terms of site selection, I think the most exciting thing for us that’s happened recently would be the opening in Bakersfield where, historically, after we’d hit that top 20 DMAs, we looked to the top 30, top 40 DMAs. Bakersfield was our first one outside of that, and it’s the hundred twentieth largest DMA.

And so many buckets below what we would have previously considered as being a viable site, but it’s just as successful as any of our other restaurants. And so that’s really opened up our eyes in terms of what kind of markets can can sustain a kuru sushi, and now we’re looking at places we had considered before, like Tulsa, Boise, Oklahoma City. And that’s really the lever that’s gonna help us get back to a fifty fifty split between new and existing markets Based off of the pipeline that we’re built we’re building now, we think we could achieve that by fiscal twenty seven. Just with the infilling that we’ve been doing over the last several years, our estimate on, in terms of a comp headwind is about has been about 400 basis points. And by adjusting that ratio, we can turn that headwind effectively into a tailwind.

Sharon Zackfia, William Blair, William Blair: And is the the fifty fifty split, is that a fiscal twenty six target?

Jimmy Uba, President and CEO, Kura Sushi: That’s a ’27. ’20 ’7.

Sharon Zackfia, William Blair, William Blair: Can you talk about the pace of expansion? Because you are clearly one of the fastest growing publicly traded restaurants in that 20% plus clip. Yes. Kind of what is the gating factor there for maintaining that pace of growth?

Jimmy Uba, President and CEO, Kura Sushi: In terms of our our our growth, we’ve been exceptionally proud of the 20% unit growth, but we we’re even prouder that our unit economics have improved since the time of the IPO. And so in terms of the gating factors, it would really be the quality of the management, pipeline as well as the quality of the, available sites. And we see the 20% as a reasonable goal for the foreseeable future, but we would never wanna compromise the quality of a restaurant just to hit that 20% mark.

Sharon Zackfia, William Blair, William Blair: And, Jeff, can can you talk about, whether or not you can fund to sustain that rate of expansion?

Jeff Utz, CFO, Kura Sushi: I was gonna say, we have a hundred million dollars on the balance sheet right now. We did a capital raise in November of twenty four of almost $70,000,000, which was led by William Blair. Give them a plug. It’s a very, very good transaction for us. So my projections show that if we continue to maintain the 20% restaurant level margins at our target, that we shouldn’t have to do another capital raise.

We have a line of credit out there with our parent of or our majority shareholder, Accura Japan, of $45,000,000. And if we got anywhere close, you know, we could certainly draw on that. But I don’t believe we’ll have to do another capital raise. It’s not a promise, but it it certainly looks that way.

Sharon Zackfia, William Blair, William Blair: I think one thing about the concept I mean, we we talked about the the domes and how, you know, new users of CURA might have a challenge kinda figuring out how to to open them and how you fix that with the with the next gen. What else do you hear from customers in terms of things that they would like you to change either with the menu or the format or ease of use? Reservations is probably one of them.

Jimmy Uba, President and CEO, Kura Sushi: But So that that would absolutely be the top one. The two complaints have always been the wait times and the accuracy of the wait times, and the reservation system should take care of both of those. The goal is to be able to get people seated within ten minutes of when they expect to be seated versus an hour to two hours after when they expect to be seated. We spending all this time in this restaurant is part of the rollout. We’ve noticed things that we thought would be obvious.

Like, our our our concept is famous for having these toy dispensers where for every 15 plates, you win a prize. But I’d see all these guests say, how do I get that prize? So we realized that some very fundamental parts of our concept were not being adequately communicated. So so the focus is on trying to make the concept as approachable as possible. And so we’re making the Bikrupon advertising much plundered, so it’s impossible to miss.

The domes would be another great point where it’s the original design was so finicky that you really you needed a server to bring practice dome over and spend a couple minutes. It was it was not a good guest experience, and it ate up server time unnecessarily. Now we have just a push trigger dome that we’re replacing it with. And so we realized there there are lots of opportunities to just reduce friction, and we’re starting to just check them off one by one. And so we we perform a a consumer research survey a research study every year, and we basically look at the the top problems and try to knock them out.

And, the the the top two have always been wait times and wait time accuracy, and we’re we’re very hopeful that the reservation system will finally put this to bed. The the next complaint after that is from families about the second bicker of banchoy. So if you right now, get 50 a prize for every 15 plates. A family of four might eat 22 to 24 plates depending on how hungry the kids are, and asking them to eat six to eight more plates to get that second prize is kind of a big ask, and the kids end up fighting. And we were fine with that because we wanted people to reach for those 30 plates.

But if people aren’t if it’s an impossible bowl, then it’s not worth it or it’s it’s not sensible. And so this was Jeff’s idea, but we’ve actually adjusted the threshold for the second toy. And so you can get it at 25, which is a much more reasonable, you know, two, three plate reach. The finance guy has a good idea. And so we we we did see a minor improvement in place per person in in May following the rollout.

We’re extremely excited to see q four where, you know, because of summer break, we have that many more families, children coming in and because we have IP collaborations running through the entirety of q four. Great.

Sharon Zackfia, William Blair, William Blair: Well, I think we’re pretty much out of time, but I wanna thank everyone for joining us, and we will be doing a breakout upstairs. Thank you. This presentation has now finished. Please check back shortly for the archive.

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