Kura Sushi USA, Inc. (NASDAQ:KRUS) Q1 2023 Earnings Call Transcript

Jeremy Hamblin: Got it. And then just wanted to clarify another comment from the script, which was on the unit openings and kind of the cadence that you’re expecting. So I think what you said was that you had four units actively under construction and then a couple that — additional that you are going to expecting to break ground by the end of the month. In terms of completing those, getting them open, because I know, as you noted, that they’ve — they’re a little bit behind schedule for a variety of reasons, construction permitting delays, HVAC systems, whatnot, but can you give a sense for your expectations around how many — you’ve opened one quarter-to-date thus far? Are you thinking you’re going to get two more open this quarter? And then just in terms of even for the back half of the year, is that going to be even split? Is it going to be back half-weighted? Any color you could provide would be super helpful.

Jimmy Uba: In terms of — I mean, we’re sort of going to repeat what you just mentioned, and we’re going to be repeating ourselves from the prepared remarks. But what we can say is that, we’ve got four units under construction. We’ve got two that are just about to break ground. So we’ve already opened one to date in Q2, we expect a couple more in Q2 one or two, and the remainder will be in the back half. One thing to keep in mind is that, the actual construction times haven’t really gotten longer. The delays in openings that we’re seeing are largely due to inspections and permitting where, for example, before, if you had an inspection, you could get a follow-up inspection the next day. Now this is like a two week wait. And that’s a lot more typical in urban markets versus several rural markets, which is why we have a lot of optimism for the back half in terms of not seeing the sort of hiccups that we saw with, say, Philadelphia.

And then the other thing that gives us a lot of comfort is that the remainder of our pipeline are largely in new build-outs, and so that just generally makes for a much smoother process. There’s very rarely issues with gas lines or having to get the floor level or anything like that, and so that’s another tailwind that we have for the remainder of the pipeline.

Jeremy Hamblin: Got it. Thanks for the color guys. Best wishes.

Jimmy Uba: Thanks, Jeremy.

Jeff Uttz: Thanks, Jeremy.

Operator: Our next question comes from the line of Sharon Zackfia with William Blair. Please proceed with your questions.

Sharon Zackfia: Hi, good afternoon. I guess circling back on inflation, Jeff, could you quantify the commodity and labor inflation you saw in the quarter and what you’re expecting for the year?

Jeff Uttz: We haven’t quantified it. I mean you can see the math quarter-over-quarter, what we’ve seen. We were very fortunate this year on the wage inflation or in this quarter as we also said in the prepared remarks, I think with the price increases as well as the three initiatives, the technological initiatives that we implemented, which we’ve mentioned, give us about 50 basis points to 60 basis points of labor leverage. But along with the pricing, we were able to come out with a better quarter this year from a labor perspective. So I have — and on the food, I already mentioned kind of what’s going on with inflation. I’m sorry that I can’t quantify what I’ve seen. But as I mentioned, I’m optimistic, fingers crossed, but not promising that we’ll see an improvement or at least a leveling out of food cost.

Sharon Zackfia: And just to follow up on that. I think you said the 7% wasn’t — it wasn’t enough to cover all of the inflation you’re seeing. So should we kind of read into that to anticipate restaurant-level margins kind of being under some pressure all year? Or I know there are other initiatives that you guys have and that you’ve been working on and abilities to kind of pivot that could help bolster margin. But I’m just kind of looking for some clarity and maybe on what the messaging is that you’re trying to get across there.