Kura Sushi USA (KRUS) , one of the more interesting restaurant IPOs in recent years, gave a good demonstration about what restaurants are currently up against with the release of third quarter earnings on Tuesday. Revenue of $2.8 million was down 83% versus the same quarter last year, and the company lost $9.1 million against net income of $719K. The company missed consensus estimates on both revenue ($2.81 million versus $4.1 million consensus), and earnings per share ($1.10 loss versus 80 cent loss consensus). This was a full-Covid quarter that ended on May 31st, and it shows.
KRUS is currently a small chain with just 25 restaurants, but it is also the first publicly traded U.S. sushi name. While I've never been a fan of sushi, I am clearly in the minority (in my own home, and beyond), and was very interested to see how the name would fare since going public last August at $14/share. Shares topped out at $27 last December, before falling to $8 in mid-March as markets swooned due to the pandemic. By June, with some of the panic subsiding, KRUS shares eclipsed $19, but have been sliding ever since, closing Tuesday at $11.10. Shares were down 7.5% yesterday, and the earnings release occurred post market close, so today could be another rough day for KRUS.
Clearly weighing on the name with new fervor is the fact that 14, or 56% of the company's locations are located in California, which are in takeout-only mode after the state forced restaurants to close once again on July 1st.
KRUS, which ended the quarter with $17 million in cash, down from $19.4 million the previous quarter, reported that it had $14 million in cash as of July 13th, so it is clearly and not surprisingly burning cash. The company received $1.6 million from the CARES Act, but has yet had to tap its $20 million revolver from majority stockholder Kura Sushi Inc., which owns all of the company's Class B stock, and controls the voting. KRUS currently has no debt.
The KRUS full-Covid quarter is a microcosm of what restaurant names may be facing to varying degrees, and will likely continue to face until there is a vaccine. Longer-term, the notion of publicly traded sushi is intriguing at the very least, but current growth has been completely stunted, and there's not a whole lot of visibility. When there's no clarity on when the "E" (as in earnings) will materialize, the "P" (as in price) will suffer. To generate earnings, you need revenue, and KRUS third quarter results tells that tale.