Kura Sushi’s conveyor belts give diners plenty of reasons to keep reaching for another plate, but getting them to sit down for a weekday lunch is proving more difficult.
With customer visits falling and its average check reaching $29, the revolving sushi chain is testing a less expensive way through the door. An October pilot offered meal combinations at $9.99 and $11.99, giving Kura an opportunity to compete for lunch occasions that its typical ticket may put out of reach.
The discounted meals accounted for 5 percent of orders during the three-day test, even though Kura promoted them only to rewards members. As an additional positive, the lower-priced options did not reduce average spending per customer, prompting Kura to expand the test ahead of a planned nationwide rollout in fiscal Q2 (December 1 through February 28).
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Before introducing the meals nationwide, Kura plans to adjust the offerings to ensure the lower prices don’t hurt its profit margins. It is also developing off-premises value bundles and preparing paid advertising to reach customers who have never visited.
“So if somebody only has $12, we want Kura to be a great option. But if they can spend more, we want them to come as well,” said CEO Jimmy Uba.
The push follows a fiscal fourth quarter in which same-store sales declined 5.7 percent, including an 11.5 percent traffic drop. Price and mix contributed 5.8 percent, with effective pricing of 4.2 percent.
Kura traced much of its traffic weakness to weekday lunches after studying customer feedback in August. The pressure stretched across markets, making the challenge less a regional issue than a question of how the chain fits into consumers’ everyday spending.
The company believes it is attracting diners accustomed to paying more for sushi, pointing to sustained gains in sales mix. Winning those customers, however, has not compensated for the loss of other visits.
For instance, in Q1 thus far, same-store sales have improved to negative 3.1 percent, but Uba said the change has come from mix, with traffic largely tracking its Q4 performance.
Kura is responding by holding off on another price increase. A previous 3.5 percent increase rolled off at the beginning of November, and the chain chose not to replace it. Its pricing decisions can change, but the current plan calls for margin improvement without additional menu pricing.
Uba said rising sushi prices across the industry create an opportunity to attract a larger audience. Kura’s challenge is making its affordability more visible without weakening customers’ perception of its ingredients.
Value combinations add another traffic tool to a business that has relied on pop-culture collaborations, collectible prizes, and limited-time food offerings to bring guests back.
Kura plans eight intellectual property collaborations in fiscal 2027, up from seven last year. Its Yoshi campaign runs through November and December, followed by Hatsune Miku in January and Godzilla in February and March. Four additional collaborations will follow. The company is also increasing its Kura Reserve limited-time offerings from nine to 12.
Not every fourth-quarter collaboration met expectations. Kura also saw traffic change when the World Cup began and expected visits to recover after the tournament ended. That rebound did not materialize as anticipated.
In terms of development, Kura is switching how it measures expansion. After establishing a presence in 25 states and nearing 100 restaurants, the company is changing from a percentage-based growth target to an annual opening count that can increase gradually.
Kura expects 17 new restaurants in fiscal 2027, representing roughly 18 percent unit growth compared with its historical 20 percent pace. Uba described a potential sequence of 17, 18, and 19 openings in successive years, subject to adjustments.
Openings will be concentrated in the second half, with four expected in Q1, two in Q2, five in Q3, and six in Q4. Three restaurants opened after the fourth quarter in Glen Allen, Virginia; Des Moines, Iowa; and Denver. Seven locations were under construction at the time of the call.
Approximately 55 percent of planned openings will be in new markets, with the rest in existing markets. That mix should eventually ease pressure from restaurants taking sales from nearby Kura locations.
The company estimated that cannibalization reduced fiscal 2026 same-store sales by 2 percent. Infill openings in San Diego and Austin affected previously single-restaurant markets containing two of its strongest performers. Kura expects those comparisons to ease in the second half of fiscal 2027, with further improvement in fiscal 2028.
As for profitability, tariffs added 180 basis points to cost of goods sold and other costs during fiscal 2026. Kura offset that pressure with 190 basis points of labor improvement, nearly double its original 100-basis-point goal. G&A expenses also improved by 90 basis points. The company expects another 100 basis points of labor improvement in fiscal 2027, helping support a projected restaurant-level operating profit margin of approximately 19 percent.
Robot dishwashers are part of the efficiency effort. Kura had completed 33 retrofits at the time of the call, with fewer than 20 left. Starting midway through fiscal 2027, new restaurants will include the equipment as a standard feature. Completion of the rollout this fiscal year would make fiscal 2028 the first year with the full annual benefit. Kura expects that to add approximately 30 basis points of margin improvement compared with fiscal 2027.
Total quarterly sales increased to $88.9 million from $79.4 million, but Kura recorded a net loss of $300,000 compared with net income of $2.3 million a year earlier. Adjusted EBITDA increased to $7.7 million from $7.4 million.
Fiscal 2027 sales guidance ranges from $376 million to $381 million. The upper end assumes flat to slightly positive same-store sales, and the lower end assumes a decline. The company expects a more meaningful improvement in comps during the second half.
“If we’re able to improve traffic, even if we were able to just get it to flat, that would put us in an incredible comp position. And so that’s really what we’re putting all of our efforts behind,” Uba said.
