Kura Sushi (KRUS)

Sushi restaurant chain Kura Sushi (NASDAQ:KRUS) beat Wall Street’s revenue expectations in Q3 CY2025, with sales up 20.4% year on year to $79.45 million. On the other hand, the company’s full-year revenue guidance of $332 million at the midpoint came in 1.9% below analysts’ estimates. Its non-GAAP profit of $0.20 per share was 63.4% above analysts’ consensus estimates.

Company Overview

Known for its conveyor belt that transports dishes to diners, Kura Sushi (NASDAQ:KRUS) is a chain of sushi restaurants serving traditional Japanese fare with a touch of modernity and technology.

Sit-down restaurants offer a complete dining experience with table service. These establishments span various cuisines and are renowned for their warm hospitality and welcoming ambiance, making them perfect for family gatherings, special occasions, or simply unwinding. Their extensive menus range from appetizers to indulgent desserts and wines and cocktails. This space is extremely fragmented and competition includes everything from publicly-traded companies owning multiple chains to single-location mom-and-pop restaurants.

There are no other publicly-traded sushi restaurant chains, but competitors offering entertaining or lively dining experiences include El Pollo Loco (NASDAQ:LOCO), Brinker International (NYSE:EAT), Dine Brands (NYSE:DIN), and The Cheesecake Factory (NASDAQ:CAKE). Sushi Land is a private sushi chain that competes with Kura Sushi.

Examining a company’s long-term performance can provide clues about its quality. Any business can have short-term success, but a top-tier one grows for years.

With $282.8 million in revenue over the past 12 months, Kura Sushi is a small restaurant chain, which sometimes brings disadvantages compared to larger competitors benefiting from better brand awareness and economies of scale. On the bright side, it can grow faster because it has more white space to build new restaurants.

As you can see below, Kura Sushi’s 28% annualized revenue growth over the last six years (we compare to 2019 to normalize for COVID-19 impacts) was incredible as it opened new restaurants and expanded its reach.

This quarter, Kura Sushi reported robust year-on-year revenue growth of 20.4%, and its $79.45 million of revenue topped Wall Street estimates by 0.6%.

Looking ahead, sell-side analysts expect revenue to grow 19.1% over the next 12 months, a deceleration versus the last six years. Despite the slowdown, this projection is noteworthy and indicates the market sees success for its menu offerings.

Number of Restaurants

A restaurant chain’s total number of dining locations often determines how much revenue it can generate.

Kura Sushi operated 79 locations in the latest quarter. It has opened new restaurants at a rapid clip over the last two years, averaging 27.8% annual growth, much faster than the broader restaurant sector. This gives it a chance to scale into a mid-sized business over time.

When a chain opens new restaurants, it usually means it’s investing for growth because there’s healthy demand for its meals and there are markets where its concepts have few or no locations.

Same-Store Sales

The change in a company's restaurant base only tells one side of the story. The other is the performance of its existing locations, which informs management teams whether they should expand or downsize their physical footprints. Same-store sales gives us insight into this topic because it measures organic growth at restaurants open for at least a year.

Kura Sushi’s demand within its existing dining locations has barely increased over the last two years as its same-store sales were flat. Kura Sushi should consider improving its foot traffic and efficiency before expanding its restaurant base.

In the latest quarter, Kura Sushi’s year on year same-store sales were flat. This performance was more or less in line with its historical levels.

Gross profit margins are an important measure of a restaurant’s pricing power and differentiation, whether it be the dining experience or quality and taste of food.

Kura Sushi has bad unit economics for a restaurant company, signaling it operates in a competitive market and has little room for error if demand unexpectedly falls. As you can see below, it averaged a 16.9% gross margin over the last two years. That means Kura Sushi paid its suppliers a lot of money ($83.11 for every $100 in revenue) to run its business.

Kura Sushi’s gross profit margin came in at 18.4% this quarter, in line with the same quarter last year. Zooming out, the company’s full-year margin has remained steady over the past 12 months, suggesting its input costs (such as ingredients and transportation expenses) have been stable and it isn’t under pressure to lower prices.

Although Kura Sushi was profitable this quarter from an operational perspective, it’s generally struggled over a longer time period. Its expensive cost structure has contributed to an average operating margin of negative 3.1% over the last two years. The restaurant business is tough to succeed in because of its unpredictability, whether it be employees not showing up for work, sudden changes in consumer preferences, or the cost of ingredients skyrocketing thanks to supply shortages.Kura Sushi was unfortunately a victim of these challenges.

On the plus side, Kura Sushi’s operating margin rose by 3.2 percentage points over the last year, as its sales growth gave it operating leverage. Still, it will take much more for the company to show consistent profitability.

In Q3, Kura Sushi generated an operating margin profit margin of 1.8%, up 10.6 percentage points year on year. The increase was solid, and because its operating margin rose more than its gross margin, we can infer it was more efficient with expenses such as marketing, and administrative overhead.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Kura Sushi’s full-year EPS flipped from negative to positive over the last five years. This is encouraging and shows it’s at a critical moment in its life.

In Q3, Kura Sushi reported adjusted EPS of $0.20, up from $0.09 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Kura Sushi’s full-year EPS of $0.03 to grow 10.1%.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Over the last two years, Kura Sushi’s capital-intensive business model and large investments in new physical locations have drained its resources, putting it in a pinch and limiting its ability to return capital to investors. Its free cash flow margin averaged negative 11.3%, meaning it lit $11.33 of cash on fire for every $100 in revenue.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Kura Sushi’s five-year average ROIC was negative 8.3%, meaning management lost money while trying to expand the business. Its returns were among the worst in the restaurant sector.

As long-term investors, the risk we care about most is the permanent loss of capital, which can happen when a company goes bankrupt or raises money from a disadvantaged position. This is separate from short-term stock price volatility, something we are much less bothered by.

Kura Sushi’s $170 million of debt exceeds the $62.46 million of cash on its balance sheet. Furthermore, its 6× net-debt-to-EBITDA ratio (based on its EBITDA of $19.07 million over the last 12 months) shows the company is overleveraged.

At this level of debt, incremental borrowing becomes increasingly expensive and credit agencies could downgrade the company’s rating if profitability falls. Kura Sushi could also be backed into a corner if the market turns unexpectedly – a situation we seek to avoid as investors in high-quality companies.

We hope Kura Sushi can improve its balance sheet and remain cautious until it increases its profitability or pays down its debt.

It was good to see Kura Sushi beat analysts’ EPS expectations this quarter. We were also happy its revenue narrowly outperformed Wall Street’s estimates. On the other hand, its full-year revenue guidance missed and its same-store sales fell short of Wall Street’s estimates. Overall, this was a weaker quarter. The stock remained flat at $54.73 immediately following the results.

Updated: December 4, 2025 at 9:42 PM EST

Are you wondering whether to buy Kura Sushi or pass? We urge investors to not only consider the latest earnings results but also longer-term business quality and valuation as well.

Kura Sushi isn’t a terrible business, but it doesn’t pass our quality test. Although its revenue growth was exceptional over the last six years, it’s expected to deteriorate over the next 12 months and its brand caters to a niche market. And while the company’s new restaurant openings have increased its brand equity, the downside is its projected EPS for the next year is lacking.

Kura Sushi’s EV-to-EBITDA ratio based on the next 12 months is 29x. At this valuation, there’s a lot of good news priced in - you can find more timely opportunities elsewhere.

Wall Street analysts have a consensus one-year price target of $75.44 on the company (compared to the current share price of $55.03).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.