Q2 2022 Kura Sushi USA Inc Earnings Call
Good afternoon, ladies and gentlemen, and thank you for standing by welcome to the Cora Sushi USA fiscal second quarter 2022 earnings conference call. At this time, all participants have been placed in a listen only mode and the lines will be opened for your questions. Following the presentation. Please note.
This call is being recorded.
On the call today, we have Hajime, Jimmy Ubah, President and Chief Executive Officer, and Benjamin Portland, Vice President of Investor Relations and business development I would now like to turn the call over to Mr. Portland.
Thank you operator, good afternoon, everyone and thank you all for joining by now everyone should have access to our fiscal second quarter 2022 earnings release. It can be found at www Dot <unk> dot com in the Investor Relations section a copy of the earnings release has also been included in the 8-K, we submitted to the SEC before we begin.
Formal remarks, I need to remind everyone that part of our discussion 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 undue reliance.
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 more detailed discussion of the risks that could impact our future operating results and 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 reconciliations to comparable GAAP measures are available in our release with that out.
The way I'd like to turn the call over to Jay.
Yeah.
Thank you Dan and thank you everyone for joining us today.
Before beginning with my prepared remarks.
You know because you've been duty.
Chief Financial Officer is attending to a person.
And they won't be joining our call today.
I'm very pleased to announce that what.
I don't say this momentum well, it's kind of I'll call. It that have continued as soon as the alcohol blah blah blah, if he's got it yeah.
Our team has done an excellent job of mitigating only gonna have to we have to be.
On a previous call you kind of think that yellow.
All of these kind of pick on the quarter hitting a new company they called a fourth quarter event.
He's handling well multiple on them.
All of the quarter.
Yesterday.
Humphrey com to breakdown and compare that to put it call. It 22, when you figure out.
14.5 persons Comparables.
Paul.
Eight 6% comp growth in January .
On the 40% 40% of comparable that payback is.
That is critical at that company I'm Gonna say to school you get one point pretty Buffett.
I compared it to kind of do anything you want to do that.
For the quarter of comparable sales grew by 183%.
He finances, indeed in Oklahoma.
Throughout the pandemic.
In Q2.
That's correct.
36%.
Putting a comparable eight points to 9%.
As compared to kind of do anything.
They're not holding of this gap.
Well glad to retrieve them like they thought even on higher leap of quarantined employees he picks up.
I'm going to be probably in California.
Putting this all California the company can.
Can be demonstrated by looking at the comps on a finger yet.
The comparison against that he's got a 2021 .
Yeah.
Our comparable to say, that's a little over 74%.
But the comparison, California comparable sales growth of 398%.
Colby the headwind we faced if he's got a yes Q2.
Mark I was kind of south Campos of Geelong.
It's clear that we are in a fundamentally different place.
But at the same time last year.
I mean kind of what I'm, saying.
You've been following the people or people only cool.
How do you think about audio softness due to quarantine the ribbon cutting the limitation.
As opposed to any change in demand.
And you said its momentum.
Oh, he's kind of second quarter.
He is still going strong.
David you are right in pointing to $5 million.
Representing almost 60 inch up a little over 23% on my favorite already.
And then you're not going to say the three calls.
[laughter] understanding the current state of our business.
Pete.
Although I must say it is comparable.
The more useful it sounds like you got somebody from it.
It's just the magnitude of impact Duck government operating restrictions I don't know opinions bahama.
March 'twenty.
'twenty one.
Yep Yep comparable sales growth at <unk>.
Okay.
Wrong.
93%.
On the watch 2200, 21% as compared it because he's got a funny to me.
Turning to our premises.
Q2 revenue was $1 5 million drawn on it.
Sneaks up 5.1 button.
Compared with Q1.
Revenue of 1.3 million bottle.
Makes up a full point like Boston.
Some of you may have noticed.
He took a minor adjustment on much fun.
As of May 31.81%.
All right.
Based on forward commodity inflation, what do you mean.
Yeah.
All thought of your collaboration.
You may have thrown got Teva demonstrating excellence.
Oh, but I bet, he made that a consumer and I think you can eat.
Popcorn from upgrade to consumption.
Oh, yes, well able to save money.
Hi.
We saw a small break fee.
Must be like I said at the time of order, but I think the event.
Consumer paint consumption.
Two years ago.
Okay. Thank you.
Did you see that he is a clear indication on block.
Premium Buddy.
Craig I'll say, unlike Kunal you mean.
In spite of all ongoing commodity volatility.
Well the pricing is never off the table.
I'm confident that we have to get there.
Could I sensitivity on all pricing power continues to be very songs.
Moving on to development, we opened one in Q2.
So again I don't know, which is a new market, although a fussy anything final thing with digital.
Subsequent to quarter.
And all of that in your market is the opening of our location.
[laughter].
Well I thought the fight against lung openings year to date.
Yes, but it takes time.
Openings both in your existing markets.
Oh and your comp expectations.
But it's already made.
At exact but you need from our if he's got 20 trading days.
And he did exceed.
Yeah.
We are making excellent progress on all three.
Okay.
We currently are.
On the construction stage of completion.
We expect with that do you mean that you need for.
Yeah.
In the fiscal fourth quarter.
Now I would like to provide an update on what I'm sure is couple of mind for everyone.
Yes.
Stocking.
Cheng on the Covid impact.
Hum.
Oh, that's cool.
We began to see stuffing Christoph.
December .
Equally equal obtaining eating it too.
Well I'll put it in.
At the top.
He is a Christian continued through January .
The primary driver on a sequential.
That'll come to the finish on pause at the moment.
But let me close Jewish home and it seems much improved demonstrate but oh, maybe already on the market.
Could you talk.
It's reassuring to see our employees anytime.
Pardon me.
He's talking to issue temporary.
But it's kind of a softball.
Also important to understand better what it didn't change it.
I didn't really honest I'm talking with David Brooks.
Approximately 95%.
He doesn't have to be on the hook.
It's small yet.
Future.
What about the close of the second quarter.
We sold approximately 80 basis points I've got puffins.
Oh come on at Eaton question.
And even to the prior quarter.
A lot of expectation is that I'm.
I'm not sure how much but I think the.
Commodity inflation.
Oh, well our fiscal year.
And we made some tough yeah, it would be easy.
If commodity spikes. He says I liked about I D O L a basket.
He went into the quarter.
Yes, possibly deal with lots of things.
To put on more extensive.
But he buckled down.
We are very excited to benefit from his expertise, especially when you're doing these pinata Oh Oh.
Oh my own supply chain.
The business impact from Covid.
Cologuard is much and it sounds like Q2.
So as I previously mentioned.
Do any of this.
People all macro.
Oh, Oh, we remain optimistic at the close of the pumping.
Now to update everyone on the phone from inception.
By Yamana unfold.
Well, let's talk about to see a whole lot of forms.
Today, we have mobile in 'twenty or are they for them.
Or a little bit more of an awful lot system.
Is it all about Saba did he buy immediately.
In terms of what did you think blah blah blah blah blah front of house employees.
We hope you're going to be substantial and they make up the mall is more attractive and below yeah, what future candidates.
It's pretty strong I think oh, well, we don't mean that he quoted here both in terms of the BMC Hum.
Almost thought about to provide.
The improvement on a Friday.
The other thing to somebody that's not well known hospitality focused the responsibilities.
But on the whole house employees.
But instead, a very already come.
Premeditation.
Yes.
Got it.
And we expect I don't know what to tell us with anybody.
In the future.
That's funny is getting all that in all of that and that implementation is going well.
Yeah.
So a lot of companies in 'twenty, two and we expect systemwide rollout or touch all the ink on the automotive havas to be completed by the end of the fiscal year.
It could also about what he was a member.
Continue to be very strong.
80000, new members do I need to do anything that you'd see for a total of 393 of the member.
As of the end of that quarter.
Eastern Tonight.
Approximately 11000, he was a member well every crafted.
[laughter] exceptional.
And companies on too much debt.
Correct.
On the system in July .
In terms of brand affinity and loyalty.
Oh Cuda.
What's up and all.
I'm tremendously excited to announce that they just added some too.
Pete.
In February .
Hi, Yes, Mike Finegan.
The whole thought the chief marketing officer.
Mark was most recently, the chief marketing and information Officer, Bob unclear.
In marketing leadership roles.
On the phone company.
Wendy.
On the Pizza hut.
Yeah, particularly interested it marks would you like bucket without marketing and I T. Even how cheap technology to our content.
But mark has only been with us for a couple of months.
He's already making huge contributions to the company.
And we couldn't be more excited to see.
It takes a it takes us on our journey as a block.
That's a pretty old things to come.
Well well well over here any project.
The development of the next to say Oh, well program.
In past earnings calls, we have mentioned that.
Potentially or do you watch program.
Only be unlocked once we have the ability today about it you get the data.
I believe Mark you have the perfect platform to stay ahead.
Oh, the rats and mice with remarks by thanking all the team member.
As a result, our restaurants well it's amazing.
Yeah.
They haven't gone from Harbin resilience in two states.
States and Washington D C.
It's great that it's Jose.
In your market.
I sincerely appreciate your excellent block that each team member.
They create a great guest experience.
Yes.
Awesome.
Is that any time, Nicole a whole lot to ban it briefly discuss I'll find out that I'm sorry.
Great.
Yeah.
Thank you Jimmy.
Fiscal second quarter total sales were $31 $3 million as compared to $9 $1 million in the prior year period.
Week measurement of comp sales growth is most relevant versus the pre COVID-19 period fiscal second quarter 2020.
On that basis comp sales grew by 11, 3% with regional comps of eight 9% for California, and four 6% for taxes.
Turning to costs.
Beverage costs as a percentage of sales were 30% compared to 35% in the prior year quarter.
Pricing taken at the start of the fiscal first quarter, partially offset by food cost inflation and largely normalized performance the sales volume improved.
Labor and related costs as a percentage of sales increased to 33, 1% from 22, 7% in the prior year quarter due to the lapping of the employee retention credits recognized in the prior year.
Excluding the impact of the euro steep labor and related costs as a percentage of sales in the prior year quarter would've been 46, 9%.
The year over year improvement in labor and related costs as a percentage of sales. Excluding D. C was due to higher sales leverage partially offset by increases in minimum wage.
Occupancy and related expenses as a percentage of sales improved to seven 4% from 17, 9% in the prior year quarter, primarily due to higher sales leverage.
Other costs as a percentage of sales decreased to 13, 9% compared to 22, 6% in the prior year quarter.
Hi, yourselves leverages as well.
General and administrative expenses were $5 $5 million compared to $2 $9 million in the prior year quarter.
Wouldn't be impacted the he or she recognized in the prior year quarter General and administrative expenses would have been $3 $3 million in.
The increase was primarily due to compensation related expenses as we made investments in our team to support our accelerated growth plans as a percentage of sales general and administrative expenses were 17, 4% compared to 31, 6% in the prior year quarter.
Operating loss was $1 $9 million compared to an operating loss of $3 8 million in the second quarter of fiscal 'twenty one.
Income tax expense of $3000 compared to an income tax expense of $29000 in the prior year quarter note that we expect to continue to incur nominal income tax expense quarterly irrespective of our pre tax income or loss as a result of the full valuation allowance against our deferred income tax assets and incurred some minor income taxes payable.
State levels.
Net loss was $1 $9 million or <unk> 19 per diluted share compared to net loss of $3 $9 million or 46 cents per diluted share in the second quarter of 2021.
When adjusting for the ERP benefits the second quarter 2021 adjusted net loss was $6 $5 million or 78 cents per diluted share.
Restaurant level operating profit as a percentage of sales was 17, 8% compared to restaurant level operating loss as a percentage of sales of 14, 8% in the prior year quarter.
Adjusted EBITDA was zero point $4 million compared to a negative $4 $7 million in the second quarter of fiscal 2021.
Turning to our cash and liquidity at the end of the fiscal second quarter, we had $36 $4 million in cash and cash equivalents and no debt.
We remain confident we can achieve our annual guidance given our fiscal second quarter results and subsequent business performance as a reminder, our full year guidance as follows.
We expect total sales between $130 million and $140 million, we expect general and administrative expenses as a percentage of sales of approximately 17% and we expect the opening of eight to 10, new units with net capital expenditures per unit viewpoint $1 million now I'll turn the call back to Jimmy.
This concludes our prepared remarks.
I'm now happy to answer any questions you have.
Operator, please open the line for questions.
He minder lettings.
We went into the Q&A session I may answer in Japanese before my this is translated into English.
Thank you 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 would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
One moment, please while we poll for questions.
Thank you. Our first question comes from Andrew <unk> with BMO capital markets. Please proceed with your question.
Hi, This is Amanda Morley answer Andrew.
My question is given the current environment have you recently seen any notable changes in consumer behavior as it relates to the number of planes per customer traffic wait times etcetera are you seeing any regional differences that you would call out.
Thank you for your possibly Oh.
Oh, Yeah go ahead, Yeah go ahead Jamie.
Yeah.
Oh, Okay. So oh.
Please allow me to answer that question in Japanese.
So you don't know and I'll, just take a second and you're correct that these or any kind of thought at all when it comes like either.
That's all he picks up the unquote Untying Okra study I couldn't couldn't take almost like a cell kill them thinking about at all.
Q2 could equal about on the Q1.
They didn't know or should that all geographic glad you put out for now.
My question quite as long ago at all or are we talking about almost a little bit because he bet on that.
Okay, what are the acuity and at what dose do you think I'll come back to my home in a scheme on Epsilon.
Hi, Amanda to answering your second question first in terms of regional differences in consumer response.
Q2, we saw.
Minor pressures in Texas relative to a typical just given the greater incidences of warranty staff and we had some weather events, but having entered Q3 mark the operating environment is very similar to Q1, we're not really seeing any major differences between reach and California naturally has.
A greater degree of conservatism when it comes to the pen.
But I mean, Los Angeles County is just renewed their vaccine mandates for indoor dining indoor back sandeep can drop across the state and so.
Got.
It's about as good a situations has been since we've entered the pandemic.
Although in all of them, but again, that's on the behavior not just get them. All on all my children are developed though I don't know what else do they keep up with it I mean, just quoted it on all honest I forget anymore.
Please go ahead with that but demand in all honesty.
On the physical market demand.
Well, we cannot put it you've been you've kept it at the moment. That's all so nobody has a crystal ball on all the on all cause I'm tornado well call. It a more honest people to keep that one study says and of course, when you step back from that and put it out and get some demand.
Even though often.
Hi in terms of the overall.
The pandemic situation, we were really encouraged to see in Q2.
Just how quickly we were able to rebound from from Omicron, it's been the fastest recovery we've seen since entering the pandemic and I think it says a lot about consumer psychology, where they're at in Q, We mentioned that we've taken.
Pricing in September .
And to give context to that we'd discuss played consumption rates and they do play consumption rates haven't changed whatsoever. Since Q1, and both of those are meaningfully higher than our.
Consumption rates per person.
Pre pandemic and this is really encouraging because you know whenever you take pricing there's concern that there could be a delayed response that delayed pushback, but now that we're six months in some taking that.
That's September price, we know that the pushback.
Lack of pushback is.
It's holding.
Okay, Great and then if I could just fit in another question can.
Can you provide an update on your tech initiatives as it relates to improving table turn times for example, I believe.
Handhelds have now been fully rolled out for the entire quarter I'm talking about possibly being expanded so have you been able to quantify exactly how impactful it has been.
So mother and all.
Oh, Oh, so you don't have to go to kind of quantify sitting on lots of Dolby cinema I'm, a comedy Q3 level.
Finally, I must admit I don't know what are the margin be tenure temple equate it to the jumped on it how does equal to you know what's going to cause you talked a lot about the Pocahontas diplomat.
It's a little bit difficult for us to quantify just given all the noise in Q2 between omicron weather.
Weather events in certain markets, but also because we've rolled out our initiatives. So rapidly in succession, it's hard to tease out right now is the specific impact of any given initiatives.
Oh, let's get them on all aspects of we might get into pivotal puzzles, how about table beside the bed. That's a favorite decided to drink or that's just the mix of tenants are putting on them you can affect your thinking on a boat or what are you telling us. That's what would you I guess, but you can't you know we've got you just don't take what are the highest they can eat company most of it's because they've been on a contract.
That being said in terms of the three initiatives that we've that we're focusing on to this fiscal year. The robot server Rollouts people side came in and touch panel drink ordering with two major goals. The first is to drive sales as you mentioned through increased.
<unk> improved table turn times and the others to reduce labor as a percentage of sales and looking at initial results.
We're confident that these initiatives are going to contribute to both of those goals.
Great. Thank you so much.
Thank you Amanda.
Thank you. Our next question comes from Jeremy Hamblin with Craig Hallum Capital Group. Please proceed with your question.
Thanks, and congrats on the strong results.
I wanted to start with unit openings and make sure that I confirm what I heard you I know that you opened a location in Watertown, Massachusetts.
I think what you indicated was that the remaining openings for the year would all open up its difficult Q4.
And so you know I think you had indicated that previously it's.
Roughly four to five months.
Between the time, when you break ground and when you complete a store and its ready to open. So first I wanted to confirm the timing of those openings second I wanted to understand.
We've heard a lot about permitting delays construction build delays and whether or not you're experiencing any of that.
Sure I'm happy to answer any questions.
<unk> fourth quarter and not only looking at bolt ons.
It's on the fourth quarter I'm, not going to know I know.
Oh My God go on occasion for a particular kind of store closing.
No I'm good.
Mccann took some open the opens up colonsay called what is called a little bit too much into any open. So I thought what the market does your name I didn't eat up they get that ability and what about them or you don't know.
And our construction liquidity they can't come up with it.
But if I can hold at the company controls Roper, that's almost got to come up and tell them you want to.
Got it.
I just wanted to get a country the Oakland Temple cant continue.
What are the one or something.
Jeremy to answer your first question yes.
You heard correctly and that we expect all of our remaining store openings for the fiscal year to be in Q4 given that.
Only a three months period, where we're gonna be trying to spread out the openings as evenly as possible throughout the quarter to reduce stress on our opening teams, but we do have multiple opening teams now and so we are able to open stores in parallel as you mentioned the permitting delays are really the overwhelming.
Not overwhelming but they're they're really the main factor in terms of uncertainty for construction times and so.
That's going to impact the cadence of the openings in Q4, but everything else, we're doing everything in our power to control you mentioned stuff about like material delays or whatever one important change that we introduced at Asbury firsthand hazardous location in San Antonio we used our first domestically manufactured conveyor.
Belt and furniture typically we shipped this in from Japan, or China, it's substantially more expensive right and it could be a four to five month period, where whereas this U S factory.
Virginia sorts of four to five day delivery.
So San Antonio, which as you can imagine it gives us a lot more control over construction time and so we're really we're really excited about this partnership.
Great. Thanks for that color I also wanted to confirm.
As you were providing some color on our sales.
Sales trends I think that you indicated that March was up 22% versus February .
That might be just the number of days in the month.
But I think that calculates to about like $10 to $10 $3 million versus I think you said March was 12 and a half million in sales.
I wanted to understand you know it sounds like plate consumption rates.
Have remained stable.
The additional price increased one 8%.
Even though that you did take some price.
And some of your markets in December .
What was the sense given what we think is significant pricing power that.
That you have you have a lot of peers, who are are taking more like mid single digit in some cases high single digit price increases.
Hum you know how did you think about whether or not.
To be a little bit more aggressive and is there some thought to.
Potentially taking additional price increases in calendar 'twenty two.
Sure.
As a note before I dig into this Jeremy I just wanted to mentioned that we didn't have a price that we didn't we didn't take any pricing in December you might.
I've known.
You might be confusing that with the September pricing, but in terms of pricing power in our aggressiveness with price I think were being very diligent about it we never like to grow margin, we don't like to drive margins through pricing.
The pricing that we've taken in March is really it's it's to offset increases in minimum wage and what we anticipate in terms of commodity pressures, what we knows that.
Delivering a great value has always been quarter, where our brand and even in spite of the pricing that we're taking the purchasing power of the that the.
The rest of the sushi industry being so fragmented it's just not nearly on the same skills weird.
The mom and pops or having to take formal pricing we are in so.
In spite of the pricing that we're taking value Delta continues to grow so we're very much.
I think we're.
Pretty happy with our position right now.
Okay great.
And then your other operating cost line item.
That was up about $700000 sequentially versus your revenue increased about.
500000, I wanted to just get a better understanding I think that line item includes utilities repairs and maintenance insurance credit card fees.
Stock comp expense.
Could you give us a little bit more detail on on exactly where.
Pressure was on that.
Which of those line items was causing that sequential increase and whether or not that's maybe a good baseline to think about on a go forward basis for that other operating cost line item.
Sure.
Going forward, we expect our.
Other costs to be closer to Q1, and Q2 as a percentage of sales Q2 saw a number of one time costs such as you know, we do restaurant deep cleans whenever we did ship.
<unk>, we had we swapped out all of our uniforms or why they were just a number of minor one time costs that have been.
Coincide in Q2, but.
Q3, we're expecting something much closer to Q1.
Okay, great. Thanks, so much best wishes guys great job. Thanks, Jeremy.
Yeah.
Thank you. Our next question comes from Matt Curtis with William Blair. Please proceed with your question.
Hi, good afternoon. Thanks for taking the question I have a question on off premise is next.
It ticked up I think 251% last quarter, if I heard you right I'm just wondering how those trended in March.
And then relatedly given that you've talked about.
The units you have in the pipeline having features designed to make off premises more frictionless.
I'm just wondering if you could tell us when some of these might be expected to open.
In terms of the off premises mix I be bumping Q2's, largely driven just by a colder wetter.
Trend we've seen every year.
The rest of the industry sees as well.
Q3 be off premise mix is closer to it it's more into Q1 range.
In terms of the units in our pipeline for.
E more frictionless off premises. So I just want to enter until at least fiscal 'twenty three.
Well to be a sports with pick up windows for order ahead orders, but nothing like the price route.
Yeah, it's nice to have it's gravy for us, but overwhelmingly the major driver of growth.
Topline and bottom line for us is gonna be unit growth and so.
Just given that we're barely 10% into our our white space potential. There's just so much more to be gained by focusing our energies on that as opposed to off premises.
So our focus remains on unit growth as opposed to improving off premises sales mix.
Okay.
I can actually just follow up on development for a moment I mean, given all the success you've been having in new markets.
Okay.
<unk> split in the future years or are you considering a meaningfully so.
Spansion.
New markets potentially starting next year.
I have been thinking.
Uh huh.
Were you asking you for a mix of units is going to be skewed a little bit more towards infill in the future.
Oh, no I'm asking if it would be skewed more towards new markets in the future.
Oh got it.
No I'm thinking yano, but he was like 50 50 to see new market that they didn't have anything like that that you can must get it the more I don't know.
I want them all day, but.
I don't know if it was capable digital if you don't have to get done with it almost like another season I know you didn't single market kind of idea that I mean, if you don't have to go with what else does he get them correctly.
A market.
Okay.
Like the most.
I don't so we do expect a mixed about 50 50 between new markets and existing markets in the near term, but that being said we are now in 11 States and D C.
So naturally as the number of new markets to enter the number of remaining new markets, just kind of shrink and so that ratio is just going to skew naturally, but we do want to expand our presence to most of the major metropolitan areas. So that's going to continue to be a focus for us.
Yeah.
Okay understood. Thanks, very much and good luck.
Thank you thank you Matt.
Yeah.
As a reminder, if you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.
Okay.
Our next question comes from George Kelly with Roth Capital Partners. Please proceed with your question.
Hello, everybody. Thanks for taking my questions and congrats on a strong quarter.
So first just wanted to better understand March.
The $12 5 million number that you gave.
Wondering if there was any kind of a unique promotion to highlight there that drove business or anything else and what are you still.
Negatively impacted in any market quite COVID-19 restrictions during March.
Okay.
But you know on all I will give it up.
Because there are no sandy I'll jump into your company you must look at them, but not much at all and it's not like you're Muslim myself Angela.
Using it on a couple of months.
And in March our brand.
Collaborator with Sanrio, which is an extremely well known brand we partnered with them in the past and it's been very successful and it's proved to be just as successful for us this time as well.
That's all on our corporate lending book.
If you look at the Oklahoma to get them all on all fronts.
Okay.
My children that are month to month, well photo anymore.
What about suffering quite a bit about it kept going up what else you want to go another one that I had with a strategical buttons and all that going on not only novel patent in Europe . There are no yeah pretty cool.
People, sometimes algorithm Marcellus out there wasn't a mother I Gotta go to cut up along with it but one of the key and I'll sort of put them to work I'll state that.
So don't think honestly this momentum like you don't feel good that macewen they've been at all on Oklahoma. So got out in front of people. So they can more easily almost upside to get us there.
In terms of the Covid impact for March it's been extremely limited.
Pretty much the same as <unk>.
Are there other good times of the pandemic troughs.
Depend on spread and so the impact to us has been.
Basically.
Minimal or nil.
In the prepared remarks, we've mentioned that we're about 95% of where we'd like to be in terms of staffing and ensures that 95% that means that we're able to keep all of our restaurants open for full operating hours and.
Seating for pretty much all of our restaurants closing that gap of 5% that would allow us to improve table turns a little bit more and so that's our immediate focus for the near term is to close that gap.
And the sales momentum that we've seen in March is extremely strong and it's very much in line with Q1 and if we can close the gap we think we can.
Possibly we could even outperform what we've seen in Q1.
Okay.
Because they can buy more when does he didnt not adult so call. It one of them, but most of them all call. It all worked out the more it looked at the Guinea they've taken one around the question Amit Let me know he took them, especially that Oh.
Colby the pumpkin was talking with you all physical don't want them off from that at all.
Oh absolutely.
So it's all good.
In terms of staffing issues generally.
People are debating whether or not this is primarily COVID-19 driven or if this is going to be an issue. Even following the pandemic. Our approach is to cover our bases as much as possible and so we're just assuming that staffing difficulties are going to continue and so we really made her.
Trading and retention really the top priority I think it's been like a key theme for the last couple of earnings calls.
So we're going to really continue to thrill into staffing and I think the efforts that we've been making over the last half.
Half a year.
That's what's delivered at 95% level.
Okay, Great and then one other question for me just there were several positive comments in your prepared remarks regarding these new units that you've been opening.
So Mike I guess I had two.
Two questions. The first one is I think that you mentioned.
That your target unit level economic profile, you might just be needing to sort of revise that higher as far as <unk> and store level profitability. So did I hear that right and can you be any more specific about.
How that's changing and then the second question as well.
What is it that you think youre getting better at.
Are you picking better locations doing better marketing like can can you give us any.
Idea of just where do you think that improvement is coming from.
Sure.
Oh, okay.
Okay.
I don't know.
Open stocking he comes up with all of them to get them all on ore now there's also you've got it.
I'll need to get them on AG.
Got it all right for the one that's getting all the corner. If anything you think you need to you know an openness to that so don't be normal pumping hygiene.
I mean, that's longer and what kind of discipline on the quite high school somebody doesn't can you Tim because if somebody was asking me what are the other shipping on a weekend. Okay of course limited my feeling on this one.
I'm talking about opening up came up from that.
Well then well go.
When you put them on location that took my Sunday, but sort of are there any kind of parameter. He gets them put up some I'll say because I don't know if David usually not bidding on or you don't get on a month to month.
Doesn't mean, it doesn't mono crystal and it'll be quota typically kind of stuff, but what about on all lots of product for Penn State.
Simple motor compensate them up and get them. All he must have to me something that you would put them and if they can put up with ocado, Tim when he got a couple of them something well do the best you can kind of shake out as you talk with someone else.
Look when you sort of you get I know I'm still at night.
Okay.
To answer you.
Your question about the.
The new unit performance a lot of this is driven by our strategy.
The strategy, we've taken in 2020 in 2021 and two.
Unit growth.
Pretty much every other restaurant company was totaling up and limiting their capex costs. We still hope that this was a huge opportunity in terms of capturing prime real estate that might've been otherwise inaccessible or more difficult for us to access and.
We're extremely pleased to see that that strategy has paid off and the units are as productive as we'd hoped they'd be in terms of <unk> new unit expectations.
It's still very early into it.
These store openings, but.
We see plenty of room or opportunity for exceeding the three and a half million ease that we've seen historically.
Beyond that.
We're.
We're not giving too much we're not getting new unit guidance or expectations today, but we hope to do that once we're in a more once we've had a normalized operating environment for a longer period.
Yeah.
Okay. Thank you very much and congrats.
Thank you very much.
Thank you. Our next question comes from James Rutherford with Stephens, Inc. Please proceed with your question.
Hello, Good afternoon, thanks for taking the questions.
I want to touch on commodity inflation I'm, just curious what visibility you have into commodity prices and kind of year over year inflation in the back half of the year and what are what your expectation for those rates would be.
Sure in terms of commodity inflation, we saw that.
Over Q2, we saw about 80 basis points as a percentage of sales in terms of commodity inflation, which the September pricing was able to offset and pricing that we've taken.
As of March 1st do you expect.
Offsetting commodity inflation as well as minimum wage inflation to give you some context for minimum wage on January 1st week. After we saw that one 5% as a percentage of sales.
Minimum wage inflation and so you can kind of work backwards from that to get our expectations for commodity inflation, but one thing that we'd like to touch on again is.
It's.
The fact that our basket has over 100 items and the fact that our top five purchases makeup.
About 25% of our overall purchase makes us extremely resilient in terms of commodity spikes. It's one of the main reasons, we've been able to keep.
Our Cogs flat in fact, not just flatbed historical bests when that's just not been the case for everybody else and so we're really glad to have disadvantage.
Understood, Yeah, and it makes a lot of sense.
Question is on technology.
Curious when you implemented the robot servers and other pieces of technology, how much improvement in table turns that you've seen and.
And if that's going to be a material sales tailwind as you finished rolling these out through the system.
But put them all on our facilities must take a little more carefully about movies about 40 people with adult implementation, especially when I was at my pick up enough to hold up on it.
So they've got probably not but the easy money.
So to put it on all but those.
Those are the more things they want to see but dental hunker mono mono modal.
No its kindle and I'll pick up on our food you can't do what I think you're looking at about did you tighten up.
I don't want the office.
So the robot server rollout that.
You know over two G that largely coincided with the ship quarantining and so it's extremely difficult for us to be able to.
Worked out the robot server impact on table turns just given that there were you know.
Understaffing in many of our restaurants.
Just generally but again, we're very excited about the robot servers. The response from our customers as well as our servers has been phenomenal and we.
We expect to fully rollout by the end of the fiscal year and hopefully.
There'll be enough normalized operational time for us to give you a more concrete update.
Yeah.
Okay perfect perfect. Thank you Jimmy Thank you Ben and best of luck.
Thanks, James Thank you James.
Thank you there are no further questions at this time.
This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.