Kura Sushi USA, Inc.

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the Kura Sushi USA Incorporated Fiscal First Quarter 2026 Earnings Conference Call. At this time, all participants have been placed in a listen-only mode, and lines will open for your questions following the presentation. Please note that this call is being recorded. On the call today, we have Hajime Jimmy Uba, President and Chief Executive Officer, Jeff Utes, Chief Financial Officer, and Benjamin Porton, Senior Vice President of Investor Relations and System Development. And now, I'd like to turn the call over to Mr. Porton.

Thank you, Operator. Good afternoon, everyone, and thank you all for joining. By now, everyone should have access to our fiscal first quarter 2026 earnings release. It can be found at www.kurosushi.com in the investor relations section. A copy of the earnings release has also been included in the AK we submitted to the SEC. Before we begin our formal remarks, I need to remind everyone that part of our discussions today will include forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not guarantees of future performance, and therefore you should not put under reliance on them. These statements are also subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. We refer all of you to our SEC filings for a more detailed discussion of the risks that could impact our future operating results in financial condition. Also during today's call, we will discuss certain non-GAAP financial measures which we believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation, nor as a substitute for results prepared in accordance with GAAP, and the reconciliations to comparable GAAP measures are available in our orange release. With that out of the way, I'd like to turn the call over to Jimmy.

Thanks, Ben, and happy New Year to everyone for joining us on the call today. We are making great progress towards the goals we laid out in our annual guidance and towards achieving creative comparable sales on a full year basis. Regarding our goal of 16 new restaurant openings, we have 10 units under construction on top of the four restaurants opened to date. Our commitment to aggressive cost management has reduced G&A as a percentage of sales by 80 basis points on an adjusted basis. We are also able to deliver labor as a percentage of sales, renewing our confidence in our ability to improve labor costs by 100 basis points in fiscal 2026. The first quarter has created a strong foundation for us to build on as we enter the easier comparisons of Q2 and Q3. Total sales for the fiscal first quarter was $73.5 million, representing comparable sales growth of negative 2.5%, outperforming the complex expectations we had shared during our last earnings call. We were very pleased to see the sequential improvement at the end of the quarter and for this momentum to have continued past November. Most of this as a percentage of sales were 29.9% as compared to the prior year quarter's 29%. As a reminder, we took 3.5% price on November 1st, so Q1 did not see the true quarter benefit. Also, as we have previously discussed, we expect full-year costs to be around 30% after considering the impact of tariffs and achieving the full benefit of our menu price adjustment. Labor as a percentage of sales was 32.5% as compared to the prior year period of 32.9% due to a number of initiatives relating to operating costs. Shifting to real estate, we opened four restaurants in the first quarter, Arcadia and Modesto in California, and Freefold and Lawrenceville in New Jersey. We currently have 10 restaurants under construction, including one in Tulsa and one in Charlotte, both of which are new markets for us. As we have mentioned in the last Astonings call, Fiscal 25 was the strongest class in recent memory, and the restaurants we've opened to date are continuing this trend. We expect to open one more unit in the fiscal second quarter, and for the remainder to open in the back half of the year. Turning to marketing, we are currently engaged in our campaign with Kirby coinciding with the release of Kirby Air Riders for Switch 2. As part of our efforts to maximize the impact of each collaboration, we have introduced IP-themed Mr. Fresh Domes and touch panels, which have been well received by our guests. As we mentioned in our last running call, research is ongoing for the introduction of reverse program status tiers. We also began advertising our reservation system for the first time during the holidays. In preparation for the reservation system's marketing campaign, we have also decoupled the reservation system from our revert program with the hopes of encouraging adaption by removing the user friction created by a required map download and allowing guests to place reservations directly through the cooler website or our Google Maps pages. In other system development news, The manufacturing of our robotic resources is proceeding on schedule, and we continue to expect to begin installation in Q3 and to have the majority of the 50 eligible existing restaurants retrofitted by the end of the fiscal year. To conclude, we are pleased with the progress we've made towards the goals we shared with our annual guidance. We believe we are on the right path to achieving positive comp sales for the year. I would like to express my thanks to every one of our team members at our restaurants and support center for their partnership in achieving these goals. Jeff, now I'll hand it over to you to discuss our financial results on the liquidity.

Thanks, Jimmy. For the first quarter, total sales were $73.5 million as compared to $64.5 million in the prior year period. Comparable restaurant sales performance compared to the prior year period was negative 2.5%, with a negative traffic of 2.5%, and flat price and mix. Comparable sales in our West Coast market were negative 2.8%, and comparable sales in our Southwest market were negative 2.7%. Effective pricing for the quarter was 3.5%. On November 1st, we took a 3.5% menu price increase, and after lapping prior year increases, our effective price for the second quarter will be 4.5%. As a reminder, beginning in the first quarter of fiscal 2027, we will no longer provide regional breakdowns for comparable sales, as regional comps are largely determined by the timing of infills, and we do not believe that they are indicative of overall company trends. Turning to costs. Food and beverage costs as a percentage of sales for twenty nine point nine percent compared to twenty nine percent in the prior year quarter due to tariffs on imported ingredients. Labor and related costs as a percentage of sales for thirty two point five percent as compared to thirty two point nine percent in the prior year quarter due to pricing and initiatives related operations offset by sales due leverage and labor inflation. Occupancy and related expenses as a percentage of sales were 7.9% compared to the prior year quarter's 7.4% due to sales deleverage. Depreciation and amortization expenses as a percentage of sales were 5.4% as compared to the prior year quarter's 4.8% due to sales deleverage and remodel costs. Other costs as a percentage of sales were 16.1% as compared to the prior year quarter's 14.5%. due to sales due leverage and higher marketing costs. This line is also impacted by tariffs, as some of the expenses in this category come from overseas purchases. General and administrative expenses as a percentage of sales were 13%, which includes 30 basis points in litigation accruals, as compared to 13.5% in the prior year quarter. Operating loss was $3.7 million compared to an operating loss of $1.5 million in the prior year quarter, largely due to tariff pressures on our food and beverage costs and other cost line items. Income tax expense was $36,000 as compared to $39,000 in the prior year quarter. Net loss was $3.1 million or negative 25 cents per share compared to a net loss of $1 million or negative 8 cents per share in the prior year quarter. Adjusted net loss, which excludes the litigation accrual, was $2.8 million or negative 23 cents per share as compared to an adjusted net loss of $1 million or negative 8 cents per share in the prior year quarter. Restaurant-level operating profit as a percentage of sales was 15.1% compared to 18.2% in the prior year quarter. Adjusted EBITDA was $2.4 million as compared to $3.6 million in the prior year quarter. And at the end of the fiscal first quarter, we had $78.5 million of cash, cash equivalents and investments, and no debt. And lastly, I'd like to reiterate our following guidance for fiscal year 2026. We expect total sales to be between $330 and $334 million. We expect to open 16 new units, maintaining an annual unit growth rate above 20 percent, with average net capital expenditures per unit continuing to approximate $2.5 million. We expect G&A expenses as a percentage of sales to be between 12 and 12.5 percent. And we expect full-year restaurant-level operating profit margins to be approximately 18 percent. With that, I will turn things back over to Jimmy.

This concludes our prepared remarks. We are now happy to answer any questions you have. Operator, please open the line for questions. As a reminder, during the Q&A session, I may answer in Japanese before my response is translated into English.

Thank you. And we will now be conducting a question and answer session.

If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star two if you'd like to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys.

One moment while we poll for questions.

And our first question comes from the line of Sharon Zaxia with William Blair. Please proceed with your question.

Hi, thanks for taking the question. Happy New Year. I wanted to talk about the decision to decouple the reservation system from loyalty. Can you talk about kind of what led to that decision? Were you not seeing loyalty members kind of react as you had hoped? And then as you started to market it, what has the early read been potentially bolstering those shoulder periods, which is what I think kind of was the hope for scenario with the reservation system?

Yeah. Hi, Sharon. This is Ben. So in terms of reward member uptake on the reservation system, we're actually extremely pleased. More than half of visits by rewards members are being done through the reservation system. And so uptake is frankly better than expected. And so that's been very encouraging. We really just wanted to open it up to a bigger audience. It's a big ask to have somebody install an app just for one function. And so we felt let them experience how useful it is, and then maybe we'll be able to convert them into rewards members after the fact, as obviously we want as many people to join the rewards program as possible as they tend to visit more and spend more per visit. And so that's been very encouraging. We started marketing the reservation system more post-decoupling in the last week of December. And so there's pretty limited data in terms of you know, uh, what we've seen in that, that one week of advertising. But what is really encouraging is that for the people that have tried it, they basically use it forever. And so I think it's just a matter of awareness and there remains a upside to be unlocked to the reservation system.

Thanks for that. And then it sounded like trends ended more strongly as you went throughout the quarter. And it sounds like that continued through December. And I know you reiterated, I think, plans for slightly positive comps for the year. Jeff, just given comparisons do get so easy here in the February quarter, do you expect comps to be positive as well in the February quarter?

Sure. Thank you for your question, Sharon. Please answer your question in Japanese. Ben is going to translate. First of all, we are very confident that we will achieve three year positive comps. Especially in the last earnings call, the negative of mid-single digits was 2.5, which indicates that November was very good. Since November, we have been pricing, but after pricing, we have improved the number of customers and price and mix, and this has continued to Q2. If this trend continues to Q2, we can expect very good Q2 comps. So, I am confident that we will be able to achieve enough full-year comps.

Sharon, so in terms of our expectations regarding Q2 comps, we absolutely expect positive comps. In the November call, we mentioned our negative mid-single-digit expectations for Q1 comps. They came in at negative 2.5%, which obviously indicates that November ended up being a very strong month. One particular item that's been of exceptional encouragement for us is that Following the November, we took pricing on November 1st, but November traffic and price mix improved over the prior month. And that trend has also continued into Q2. And so standing where we are today, you know, a month and change into the quarter, we feel very good about Q2 comps.

Okay, great.

Good to hear. Thank you. Thanks, Sharon. Thank you. And our next question comes from the line of Jeremy Hamblin with Craig Hellman.

Please proceed with your question.

Thanks for taking the questions. And I wanted to hit on a couple of the kind of cost line items here. You know, so first question regarding food costs is, you know, we don't know what's going to happen with tariffs. Clearly, it's been a significant headwind, I think, Jeff, you'd called out maybe about 200 basis points for FY26. But if there were a change as we started to see some relief on tariffs impacting food costs, how long would it take for that to flow into your financials? Would it be 60 days, 90 days, if that change were to happen? And then also wanted to just ask about other operating expense category, which I think includes utilities, repairs and maintenance, insurance, credit card fees, et cetera. You know, just to get a sense for, you know, let's say the expected impact that you might have on that category with, let's say, a positive two and a half comp versus a down two and a half comp that you had in Q1. What type of, you know, leverage, deleverage would you see under that hypothetical.

Yeah. Hey, Jeremy. I'll answer the question on food costs and then I'll turn it over to Jimmy to give some color on the other cost line item. But as it relates to food costs, we mentioned in the past, generally we buy four to six months worth of product. So it'll take a little bit of time to get through the product that we have on hand in order to see a benefit and a reduction in tariffs. That being said, where food cost is ending up for the year and our 30% estimate, I'm quite pleased with that number. When we first started looking at this, it could have been a 300, you know, somewhere between 300 and 400% impact. But because of the great negotiations that were done with suppliers, as well as negotiating just the prices of things, you know, tariffs aside, I'm very pleased with that 30% number. If the tariffs are reduced or do go away, um, that number could get back into the 28th again where it was. And that's really the only headwind that we've really seen as far as COGS is uncontrollable inputs such as tariffs. So we're optimistic. We'll see what happens over the next few months as it relates to tariffs. But ending up at a 30% number is still something that we as a company are pretty proud of given the headwinds that the tariffs pose to us.

Jeremy, this is Jimmy. I'll answer your question about other cost lines, but please allow me to speak in Japanese. First, I would like to make a note of this. I will continue later.

In terms of the other cost line item, the biggest impact, unfortunately, for other costs as well was tariffs. Most of our promotional materials come from China, so our bicker upon toys, our giveaway items, those come from China, and they've been experiencing pretty heavy tariffs. And so that's been a meaningful pressure on the other cost line item. And Jeremy, as you mentioned, the sales deal leverage that we had, while the comps came in better than expected, they were still negative. And so We saw sales leverage on fixed and semi-fixed costs. Utilities were up just on an absolute basis. We've seen that broadly across our restaurant base. And then lastly, the pricing that we took, we took in November. And so we did not receive that benefit in September or October. And in terms of... Please. Okay.

That being said, with the pricing that we took in November, in spite of the pricing that we took on November 1st, we saw traffic improve.

in November and December. We also saw price mix improve in November and December, and we expect for that to flow through and give us better leverage on our other costs, which we're already starting to see. So that's really encouraging for where we'll land at the end of the quarter.

Got it. Thanks for taking the questions, and good luck. Thanks, Jeremy. Thank you. And our next question comes from the line of Andrew Charles with TD Cowen.

We proceed with your question.

Great. Thank you, guys. Jeff, I want to check with the shelf registration that you guys saw last week. You know, what are you monitoring for as you think about when you would potentially tap into it?

I haven't really given a timeline on that. When we did the capital raise a year ago, Andrew, in November of 2024, my thought was potentially that could be the last one. Right now, where we're looking at restaurant-level margins at 18% versus 20%, just for good corporate housekeeping and to be ready when the time comes, if it does. Just wanted to have that shelf registration statement out there and be ready. But we still have $75 million worth of cash and investments on our balance sheet. So we're pretty liquid, pretty strong on that side. But it's just something I wanted to have out there in case the time comes. Certainly want to keep an eye on where the share price is and if the share price becomes attractive. And there was a reason we wanted to go on to capital.

It's just being ready. Okay, that's helpful context, thanks. And then, within the reiterated 18% rational margins, you know, here you're on the 30% COGS target, here you're on about 32% labor. But I'm just curious, does the margin target embed any additional price in 2026? I'm just trying to better understand the opportunities to improve the other operating costs amid the tariffs.

As I mentioned earlier, I think the fixed cost will go down depending on the pricing. Also, depending on the pricing, especially labor costs, all fixed costs will be improved. Basically, I think it's okay to have a Q1 result with 18% of the cost. Also, the result of Q1 with 15% of the cost is already included at the time when we announced 18%. Basically, we think that we are moving at the pace that we have drawn.

Relating to the 18% annual guidance that we provided in the November call, that already contemplated the 15% restaurant-level operating profit margin we had for Q1, and so we're fully on track relative to our own expectations. In terms of the pricing, we feel that as it stands today, we have no further expectations to take price in fiscal 26. We think The pricing that we took on November is adequate. The flow-through that we're seeing is actually better than expected, and so that's really encouraging there. And, yeah, between those two things, we remain extremely confident about that 18% full-year target.

Also, other than pricing, since November, especially since sales have improved, the leverage of labor costs has increased significantly. And on another note, following the November pricing, we're already seeing leverage on our labor cost line earlier than expected.

It's really encouraging, making us that much more confident in terms of hitting that 100 basis point. labor leverage number and opening up the possibility for maybe even better than 100 basis points.

Very good. Thank you, guys. Thank you, Andrew. Thank you. Thank you. And our next question comes from the line of Jeffrey Bernstein with Barclays.

Please proceed with your question.

Great. Thank you very much. First question is just on the comp trends. You talked about the improvement to close the quarter and seemingly sustaining into the second quarter and very confident in that positive for the second quarter. I'm just trying to unpack how much you think is due to your own company-specific efforts versus the macro. I know there's lots of investor optimism around near-term benefits from lapping inclement weather and lapping the tariff headwinds. maybe benefits from tax refunds and stimulus. So just trying to get your sense for how much you attribute to your own internal initiatives versus maybe your confidence of the broader industry that will accelerate from here with those factors. Or if you don't believe that to be the case, perhaps why not?

And then I had one follow-up. Sure.

Looking to Q1, we outperformed the industry on a number of metrics, which we're very encouraged by. That was really par for the course for us historically. It hasn't been the case necessarily for the last year. And so to return to that position has been very encouraging. We think the promotions that we had in November played a big part and really To Jimmy's earlier comment about the biggest element of surprise in terms of November, that was the pricing flow through and the traffic growth that we saw post-price. And so your commentary about macro, I mean, it's still just a couple months, but that we interpret as an improvement in the consumer. And so that's very encouraging there. In terms of other company-specific comps, that comp benefit starts in December. And so November would not have benefited from that. And when we were speaking about the industry comparisons, I meant to say November onwards, not Q1.

Gotcha. And just to clarify, I know you often talk about a two-year stack. And if you held that first quarter trend, it would imply maybe a positive four or 5% in the second quarter as you're compared to ease by, I think 700 basis points. So I'm just trying to clarify, I think you said you assume modest positive comp for the full year. Just trying to clarify that. And did your trend in November and December improve on a one year or two year stack basis? Just trying to get the sense for the underlying momentum versus just comparisons.

Oh, please, please. Without providing commentary on comp performance to date, we remain very, very confident about our ability to hit flat to slightly positive comps

the momentum as we actually did the quarter was very encouraging. And to Jimmy's repeated comments, that momentum has continued. And so we feel very good about achieving that flat to positive comp for the full year.

Understood. And then just to clarify, I think you said, we know you opened four units in the first quarter and you have 10 more in the construction. I'm guessing it's not surprising to you or maybe you turn these units around faster, but you're talking about 16 for the full year. It seems that you already have 14 with good visibility. I'm just wondering how much lead time is needed in terms of construction that you're confident in that 16 plus relative to the 14 you have visibility on today.

Currently, we don't have more than 16, but depending on the timeline, we control the quality of the site, so if the construction timeline gets faster, we won't be able to open more. At this point, Looking at the fiscal 26 pipeline, we think that the 16-unit target is the upper bound.

We continue to think that's the appropriate target. We don't expect that to change. There might be a little bit of benefit in terms of faster lead times, but that's not really something that we expect. It should pretty much be Business as usual. So we opened four in Q1. We expect to open one in Q2, and the remainder are in the back half.

Thank you very much. Yeah, and so for those 10 units, a lot of them just broke ground. And so, yeah, you could keep that in mind for modeling purposes.

That'd be great. Presumably, you have two more to get you to that 16 that maybe haven't broke ground yet, but you have a good line of sight to.

Yes. Yes. Thank you. Thank you. Thank you. And our next question comes from the line of John Tower with Citi. Please proceed with your question.

Great. Thanks for taking the question. Maybe just circling back to a comment that, Jimmy, you had just made Maybe, Ben, it was you in response to the question. You had mentioned that the promos that you had done in November had played a decent part in terms of getting some traffic back into stores and lifting sales. Can you dig into that a little bit? What exactly did you do during that window? Is it something that you feel like you can repeat in the future? Or is it something that was just one-off and you don't expect to bring to future windows?

Sure. First of all, there was the second giveaway for One Piece in November. In addition to that, there was the CLARISERVE LTO and the gift card promotion in November. I think CLARISERVE contributed the most. For the first time, we were not sure if it would be a hit or not, but the item called Sakura Bacon was a big hit. I think this is probably a big contribution to November alone. I don't think we'll be able to do exactly the same thing after December, but December will be a little different. Kirby is the IP campaign I'm most looking forward to, and it shows the contribution as expected. It's not like we're going to do the same thing in November and reproduce the same effect, but in December as well.

John, so as it relates to November, we had our second One Piece giveaway, and that outperformed our expectations a little bit. We had a gift card promotion. We typically have whatever years we get closer to the holidays, but really the biggest factor for the November outperformance was our LTO, our career reserve. This month, or for November, the sort of theme item was sakura bacon and we we weren't sure how big of a hit uh bacon sushi would be but in retrospect in hindsight of course bacon sushi is going to be a slam dunk and so that that really uh was a big hit for us in terms of whether or not it's replicable uh we're not we don't have plans to you know have another soccer bacon but there's nothing to preclude that in the future certainly we're putting as much energy as we can into our lto's we know that that's a really you know, it's another lever for us. But looking to December, while we don't have, you know, another LTO, a food LTO along those lines, we have our most exciting IP of the year, Kirby. And so we're, you know, not to give a dead horse, but we're really happy with how December's shaken out. Okay.

Yeah, and that kind of leads to a question just regarding, you had mentioned earlier the idea of advertising the reservation system and reservation program. more broadly, uh, to, uh, to the non, um, rewards members. And I'm just curious to hear where you guys think the brand, well, where the brand is today with respect to broad advertising, which I don't think it does much of, uh, but where you want to be over time, uh, either as a percentage sales, you know, what mediums you want to go in and frankly, where the message should be to guests. Is it more about, Hey, this is what core sushi is, or is it more about a call to action? in terms of LTOs, like, you know, whether it's the Cora Reserve or it's the Kirby IP tie-in, you know, if you could expand on that, that'd be great.

Yeah, so I wouldn't expect us to do anything like television advertising. We're very happy with the marketing efforts to date. We think that they've done a phenomenal job just in terms of setting our ad dollars effectively, primarily on social media, influencers, etc. But those have been exceptional in terms of return on ad spend. I'd say that there's probably going to be more of an emphasis on call to actions, to your point. Our rewards members very much are moved by call to action. And so that's going to be an ongoing point of focus, especially because they're continuing to trend upward in terms of spend.

which is great.

Okay, so just rewards members in general now that we're pretty far, I think we're a year in or so, maybe I'm off a little bit, but can you speak to how they have moved in terms of either frequency and or spending levels versus where we started off a year or so ago?

Yeah, so we're now up to a million members. If we're counting newsletter up, It's actually 1.7 million members and so that's really been very aggressive growth thanks to the efforts of the marketing team. In terms of spend, a two-person ticket, per person they spend about $6 more and so that's a pretty meaningful difference and they visit more than twice or even triple a non-member.

Okay. Awesome. I will pass it along. I appreciate you taking the question. Thank you, John. Thank you.

And our next question comes from the line of Mark Smith with Lake Street Capital. Please proceed with your question.

Hi, guys. I'm curious if there's any other demographic or geographic trends that you saw in the corridor or even post-corridor that are worth calling out. For instance, I'm curious if You saw any impact when government shutdown ended. Did that drive any incremental traffic or spend or anything else to call out here in the quarter?

First of all, we haven't seen much improvement since November or December. We haven't seen much improvement in terms of geography. There are 22 states, but most of them are one store. So there's not much of a big difference. The major change that we have seen is just the broad-based improvement from November onward.

Really, we're not seeing any sort of differences on a regional or geographic basis as we've mentioned in the past. the differential between any given region in terms of comp performance is really driven more by the timing of Intel than anything else. And so it's really just been a broad-based improvement, both in traffic and ticket. And so that's been really, I guess I keep coming back to the word encouraging, but it really has been encouraging.

Excellent. And then as we look at restaurant-level margins, I'm curious if you could talk about comp units versus non-comp restaurants, kind of where the margins are shaking out for each, and then if we've seen any real change over time in one or the other.

In terms of comp-based and non-comp restaurants, we haven't disclosed yet, but we will continue to disclose. So we haven't really commented too much on the difference between comp and non-comp unit performance.

What we have said is that historically, new units have pretty strong honeymoons. They'll have elevated revenues, but they're not as efficient at managing costs as a more seasoned restaurant.

And so the RLOPMs, they actually end up shaking about the same. Perfect. That's helpful. Thank you. Thank you, Mark. Thank you, Mark. Thank you. And our next question comes from the line of James Sanderson with North Coast Research.

Please proceed with your question.

Hey, thanks for the question. I wanted to go back to the labor line item. Just wondering if you could walk through any milestones or key drivers operationally that you'll need in order to achieve that 100 basis point improvement and when we can expect that to build in the next three quarters.

Mm-hmm. First of all, if you look at the Q1 results, you can see that we have to achieve more than 150 after Q2. That's how much we have to target. Currently, Q2 is close to half, but I would like to tell you that we are doing very well. After pricing, the traffic is improving, plus price and mix. That's why sales are going up. Hi, James. In terms of

labor. As it relates to Q1, the biggest driving factor was the pricing that we've taken. We feel that we're making great progress in terms of the leverage that we expect to make for the full year and have no concerns about hitting that 100 basis point target. And in fact, you know, feel that there is a real possibility that we'll be able to get there even to get even beyond 100 basis points of leverage. In terms of the factors that need to go right, so to speak, for us to hit that, those are already in play or in place. They're largely going to be driven by the initiatives that we put in the last fiscal year. So the reservation system, the new touch paddles, the new Mr. Freshdoms, those cumulatively will get us at least those 100 basis points. And any sort of labor initiative, the benefit trends along with seasonality. And so we were, frankly, a little bit surprised to see benefit as early as we did, and we just expect that to become more pronounced as sales grow and we're better able to leverage fixed costs.

Okay, so not necessarily need to see the robotic dishwashers and other technology into the store in order to achieve that gain.

That game does...

Yes, so the robotic dishwashers are contemplated in that 18%, but the impact is going to be pretty minimal for the full 18% RLOPM, and so we'll see even more benefit as we enter fiscal 27 and we've got more of the system updated to have the robotic dishwashers. And so if we're able to implement these sooner than expected, then that's a potential point of opportunity as well.

All right. All right. Very good. Could you also review the collaborations you offered in the first quarter if they performed to your expectations?

In terms of Q1's collaborations, we had...

Demon Slayer in September. That was the second month of Demon Slayer. And then we had one piece in October and November. Both met our expectations.

Okay, very good. Last question for me. I just wondered if you had thought about your long-term growth target rate of about 300 units in the United States, if you had revised that.

This is a formal update, but it's still unchanged.

If we do have plans for a formal update, we'll be sure to let everybody know. But in the meantime, we will let the analysts provide their own estimates on that bigger number.

All right. Thank you very much. Thank you. Thank you. And our next question comes from the line of George Kelly with Roth Capital Partners. Please proceed with your question.

Hey, everyone. Thanks for taking my questions. So first one, just to revisit the tariff conversation, just want to make sure I'm capturing everything properly. So your 30% COGS target for the year Bateson, is it a 200 basis point impact from tariffs?

And then can you quantify the tariff impact on your other expense line? Okay.

Hey George, as it relates to the other costs,

The impact was largely on the promotional items, the bigger upon prices and the giveaways. Cumulatively, as a percentage of sales, there was about a 40 to 50 basis point impact from tariffs. This is pre-pricing, and so, you know, the post-November results, that should ease a little bit, but it is a pretty meaningful step up in our promotional costs.

And then, Jeremy, George, on cost of goods sold, yeah, on cost of goods sold, 30% is where we think it's going to end up for the year. It is about a 200 basis point impact, but we've had some other pretty good negotiations that have offset that a little bit. So when you look at the math from last year to get to 30%, I think it's like it'll end up being like 150 basis points, you know, delta between the two years. But the tariff impact alone is pretty significant at 200 basis points, but we've had some other good negotiations that have offset that a little bit. which is why we ended up at 30% for the year.

Okay, okay, helpful. And then second question I had is just related to promotions. You sound very pleased with how Kirby is performing. So I guess the question is, is the performance there, you know, I understand Kirby, that's a big, you know, draw, a big, big partner there. But how have you executed it differently? Is it partly sort of an internal execution issue? Maybe you're monetizing it better or advertising it better. So I wonder if that's sort of part of the reason. And then a second question is, can you talk at all about your future planned promotions for the remainder of the year?

Yeah. As it relates to Kirby, there were a number of things that we tried for the first time with this collaboration.

We have these customized Mr. Fresh domes, and so instead of just a clear dome, you have Kirby protecting your sushi. And we also updated the touch panels to be Kirby themed. These are both very well received by guests. We really want to try to just keep trying new things and continue to grow the experience. And so the guests feel that much more that, you know, it's something that can't be missed.

I'd like to tell you that I'm very satisfied with the results.

And we are very, very pleased with the results. Okay, that's great. And can you comment at all about future plant promotions for the year?

Oh, yeah, sorry. Sure. So Kirby runs through the end of January. And then we have Sanrio for February. And then March and April, we have Jujutsu Kaisen to coincide with their new anime season.

Okay, thank you. Thanks, George. Thank you, Thomas. Thank you.

And our final question comes from the line of Todd Brooks with BenchmarkstoneX. Please proceed with your question.

Great, thanks, and thanks for squeezing me in. Appreciate it. A couple questions, a few leftovers here. If we're thinking about the same-store sales guidance you provided for the full year and the price increase that we took at the beginning of November, what's the right way to think about PMIX for the balance of the year as we're kind of building into a component of same-store sales?

今年総合としてプライスミックスどれくらいになりますかって In terms of the components of Cobb, we'd be pretty low to share the price and mix expectations, just given, well, you know,

Early results post the November pricing have been very, very encouraging. It's really just two months, and so it's hard for us to extrapolate outwards. That being said, we do feel very confident that we'll be able to achieve that flat to slightly positive just based off of our trajectory to date, as well as the easier comparisons that we're enjoying now.

Okay, fair enough. Back in the other class, I just wanted to clarify When you talked about elevated marketing cost, was that referring to kind of the promotional cost around tariff-related upon pressures?

Exactly.

Okay. So as far as marketing spend on the brand itself, there's really no change year over year. This was that tariff-related pressure that you were pointing to. Exactly.

On the per-car pound? Yeah. As it relates to other costs, if we're comparing year over year, the comps for the prior year quarter were 1.8% against the negative 2.5% that we posted for the current quarter.

that alone gets you pretty meaningful deleverage. So that together with the tariff impact is how we got to the current quarter's other costs. That being said, in terms of the comp being a drag and deleveraging, we expect that dynamic to flip with Q2 as we comp positively. We expect the other costs to stabilize.

Okay, great. And the final one for me, and this goes back when You guys talked about the environment coming out of the pandemic and just the competitive decimation, the closures that you've seen. I'm just thinking about if you guys are absorbing to our basis points of tariff pressure, if we start to think about independent competitors and absorbing that kind of 300 to 400 basis points of pressure that Jeff was talking about related to tariffs, Are we seeing another wave of kind of mom and pop type of closures as you're continuing to roll out across the country here, where you've just got a more open runway as you continue to grow your footprint? Thanks.

Unfortunately, yes.

Yeah, it's a weird thing to say. Go ahead.

Yeah, I mean, we can't quantify it, and it's never good to see people go out of business, but this is a pretty consistent pattern. Whether or not, you know, there are going to be closures on the scale of the pandemic, I mean, I don't think that'll be the case. But regardless of whether a restaurant closes outright, I still think that we'll be able to capture traffic just because the pricing that our direct competitors are taking to offset their costs are only serving to highlight the incredible value that we offer.

Also, it's only been two months, but In November, we had a pretty big price increase of 3.5% for us, but even so, the traffic and price and mix didn't drop. That means that the price increase is less than that of other individual restaurants. That may be supported by our market. It may be too early for us now, but we are encouraged by the early results.

And then looking to November, we took 3.5% pricing. Granted, 2.5% was rolling off, and so we were offsetting. A big part of the pricing was to offset that, but 3.5% is an unusually large step-up for us. We typically price in increments of 1% to 2% historically. And the fact that traffic and mix have only grown since is extremely encouraging. It's only been a couple months, and so we don't want to read too much into it, but one possible interpretation is that the 3.5% that we've taken pales in comparison to the pricing that our competitors are taking, and that is why our traffic grows in spite of the pricing.

Okay, great. Thank you all. Thank you, Todd. Thank you, Todd. Thank you.

And ladies and gentlemen, that does conclude today's question and answer session, as well as today's teleconference. We thank you for your participation. You may disconnect your lines at this time and have a wonderful day.