Kura Sushi USA, Inc. (NASDAQ:KRUS) Q2 2023 Earnings Call Transcript

Page 2 of 10

Benjamin Porten: Yes. So I’m sure you remember we did Demon Slayer in July and August of last year. Comps in that quarter were 28%, 14% from traffic. Certainly not entirely driven by Demon Slayer, but it was a major component of one of our most successful quarters ever. In terms of this April’s Demon Slayer, it’s going to be the same format largely where we have the 15 plates and you get a prize, we’ll have giveaways like shirts and tote bags, et cetera. One thing that is counterintuitive and is tremendously exciting, so I was speaking with the Marketing Director the other day, they mentioned that the second campaign can actually be more successful than the first campaign, and you wouldn’t expect that. But what happens is that you’re able to €“ because Demon Slayer is such a big property, you expand your fan base through Demon Slayer with the first campaign, and then when you have that second campaign, you start with that bigger starting base.

And so we’re very excited for what Demon Slayer can do for us. And as Jimmy mentioned during the opening remarks, I’ve been sort of alluding to this in past calls, but we are working with DC Comics and that’s going to be our first really major mainstream American property and I’m tremendously excited for that.

Jeremy Hamblin: Fantastic. Thanks for the color and best wishes.

Benjamin Porten: Thanks, Jeremy.

Operator: Our next question comes from the line of Todd Brooks with The Benchmark Company. Please proceed with your question.

Todd Brooks: Hey. Thanks and congrats to all of you on the operating momentum that you’re showing this quarter. Very exciting to see. I know, Jimmy, you talked about seeing some signs of early success with the new marketing approach and bringing new customers to the Kura brand. I think we could probably point to maybe that 200,000 jump in the loyalty program has some evidence of that. But success and are we far enough into this that we can start to gauge, intent to revisit and how we’re converting those customers to additional frequency once they discover the brand? And have one more after. Thanks.

Jimmy Uba: Sure. I’m happy to answer this question.

Benjamin Porten: So we began the targeted marketing with Google in December. We’re extremely pleased with the early results. It’s only been three or four months. But just seeing the traffic strength, last quarter we were 700 basis points above . This quarter we’re actually 740 basis points above NAV track. And so we’ve even €“ we’ve gotten even further ahead of the pack. We’re really happy about that. And in terms of cost effectiveness, it’s really been unbeatable. There’s been no incremental spend. We’ve just reallocated some of our other digital advertising and so it’s been a home run.

Jimmy Uba:

Benjamin Porten: It’s hard to break out what specific €“ whether Google is delivering those new rewards members or it’s just the ongoing strength. We’ve been seeing this sort of €“ this tremendous growth for the last year or two, but we’re really happy to have this ongoing growth for the rewards members. They tend to visit about 6x as frequently as a non-member. Their average check is about 20% higher because they want to get to the coupon rate points or the giveaway break points. And about a quarter of our sales are done through rewards. And so it’s a very meaningful part of our business. We’re extremely excited to really be able to unlock the potential of that rewards program, especially the data component represents when we move to Punch.

Page 2 of 10