Kura Sushi (NASDAQ: KRUS) stock plunged in Wednesday’s trading. The sushi chain’s share price ended the daily session down, according to data from S&P Global Market Intelligence.

After the market closed Tuesday, Kura Sushi reported results for the third quarter of its 2024 fiscal year, which ended May 31. The business posted revenue that was in line with Wall Street’s expectations. On the other hand, the business reported non-GAAP (adjusted) earnings that fell short of the market’s target — and it looks like profitability could be strained going forward.

Kura Sushi stock buckles under margin pressures

Kura Sushi recorded a breakeven quarter on an adjusted basis in fiscal Q3. Meanwhile, the average analyst had called for the business to post an adjusted profit of roughly $0.01 per share.

Even though the company increased its revenue roughly 28% year over year to reach approximately $63.1 million, the margin picture is triggering an uptick in bearish sentiment on Wall Street. Across the first nine months of the current fiscal year, Kura’s restaurant-level operating margin is now at 19.7% — down from 20.9% across the same stretch last fiscal year.

What’s on the horizon for Kura Sushi?

Kura Sushi expects to close out the annual term having opened 14 new restaurants, up from the company’s initial high-end guidance for 13 new restaurants. The sushi specialist is pushing ahead with expansion plans amid cost headwinds, including rising ingredient and labor costs.

For the fiscal 2024 year, Kura is guiding for sales to come in between $235 million and $237 million. Hitting the midpoint of that target would represent a roughly 26% annual increase compared to the $187.4 million in sales posted in the company’s last fiscal year, which ended Aug. 31, 2023. For reference, Kura had previously guided for sales to be between $238 million and $243 million this year.

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Why Kura Sushi Stock Plummeted Today was originally published by The Motley Fool