On Thursday, Piper Sandler adjusted its outlook on Kura Sushi USA Inc . (NASDAQ:KRUS) shares, reducing the price target to $63.00 from the previous $89.00 while maintaining a Neutral rating on the stock.
This change followed the company's third fiscal quarter 2024 results and subsequent earnings call. During the call, Kura Sushi provided additional insights into its fourth fiscal quarter 2024 expectations, which also have implications for the fiscal year 2025 outlook.
The company reported that it anticipates its same-store sales (SSS) for the fourth fiscal quarter to decrease in the mid-single-digit to high-single-digit percentage range. This forecast is notably below the pre-announcement consensus.
Management highlighted a significant change in trends at their California stores beginning in April, which has persisted. This unexpected shift contributed to the revised expectations.
Additionally, broader macroeconomic weaknesses were cited as contributing factors to the downturn in sales. Kura Sushi also mentioned the impact of cannibalization on its business, a concern that is relatively new to the investors following the company's performance.
In response to these challenges, Kura Sushi's management emphasized a strategy focused on long-term business management rather than pursuing short-term gains. This approach aims to position the company for sustainable growth in the future, despite current headwinds. The company's forward-looking statements during the call resonated with Piper Sandler's perspective on managing for the long haul.
In other recent news, Kura Sushi USA Inc. reported a decline in third-quarter sales for the fiscal year 2024, with total sales amounting to $63.1 million and a minimal comparable sales growth of 0.6%.
Despite this downturn, the company reaffirmed its fiscal year 2024 guidance, projecting total sales between $235 million and $237 million. The company's outlook is influenced by increased costs associated with opening new restaurants and a general downturn in consumer spending, which are expected to persist into the fourth quarter and potentially into the fiscal year 2025.
Lake Street Capital Markets and Craig-Hallum, two analyst firms, have recently adjusted their outlook on Kura Sushi. Lake Street Capital reduced the price target to $64 from the previous $72, maintaining a Hold rating, citing concerns over the restaurant chain's near-term financial performance.
Craig-Hallum, however, lowered their price target to $85 from $120, while maintaining a Buy rating, reflecting on the company's revised guidance and macroeconomic factors.
In terms of expansion, Kura Sushi USA has demonstrated a commitment to growth with four new units opened and six more under construction. The company also completed its smartphone mobile ordering system, indicating a focus on technological advancements.
Despite expecting negative mid to high-single digit comparable sales in the fourth quarter, the company aims for a mix of 40-60 new to existing market unit growth for fiscal year 2025. These recent developments underscore Kura Sushi USA's commitment to long-term stability and expansion.
InvestingPro Insights
In light of the recent Piper Sandler outlook adjustment on Kura Sushi USA Inc. (NASDAQ:KRUS), real-time data from InvestingPro provides additional context to the company's financial health and market performance. The market capitalization stands at $551.79M, reflecting the size of the company in the current market. Despite a challenging period, revenue growth remains positive with a notable increase of 29.96% over the last twelve months as of Q3 2024.
InvestingPro Tips suggest that Kura Sushi's stock is in oversold territory, which could interest contrarian investors or those looking for potential rebound opportunities. Additionally, the stock is trading near its 52-week low, which may indicate a possible entry point for value investors, considering the company's revenue growth trajectory.
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