KRUS - Kura Sushi: 4 Reasons Why I Won't Be Taking A Bite
2024-04-02 17:55:15 ET
Summary
- Kura Sushi is a high-growth company expanding rapidly across the United States.
- The company has poor long-term incentives for management, with little alignment with shareholders and a focus on growing revenue rather than per share improvements.
- Kura Sushi also faces stiff competition in a saturated market, with numerous sushi shops and other Asian and non-Asian cuisine options.
- The company's low price point puts pressure on maintaining profitability, and its margins are unlikely to improve much from here.
- Even with the most aggressive assumptions, I believe shares of Kura Sushi have at least 60% downside from here.
Introduction
Kura Sushi is a chain of over 500 restaurants (mostly in Japan) that specialize in Japanese cuisine selling sushi (nigiri, rolls, gunkan, etc), sides, soups, noodles, and desserts. The company differentiates itself by providing a more authentic experience with its revolving sushi bars. Kura Sushi USA ( KRUS ) is a publicly traded company that owns its U.S. locations, which totaled over 50 restaurant locations. While Kura Sushi has done a good job of growing its store locations and revenues 4-fold since 2020, I believe investors should avoid the shares. My investment thesis revolves around a few main points: (1) poor long-term incentives, (2) stiff competition, (3) margin pressures, and (4) a lofty valuation....
Kura Sushi: 4 Reasons Why I Won't Be Taking A Bite