Q1 2023 Kura Sushi USA Inc Earnings Call
Good afternoon, ladies and gentlemen, and thank you for standing by and welcome to the Coeur Sushi USA, Inc. Fiscal first quarter 2023 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 that this call is being recorded on the call today, we have Jimmy Weber, President and Chief Executive Officer, Jeff <unk>, Chief Financial Officer, and Benjamin important Senior Vice President Investor Relations and business development.
And now I'd like to turn the call over to Mr. Part. Thank.
Thank you operator, good afternoon, everyone and thank you all for joining by now everyone should have access to our fiscal first quarter of 2023 earnings release.
It can be found at www dot dot com in the Investor Relations section.
A copy of the earnings release has also been included in 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 1995 East.
These forward looking statements are not guarantees of future performance and therefore, you stopped undue 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 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 earnings release with that out of the way I'd like to turn the call over.
Jamie.
Thank you Ben and thank you everyone for joining us today.
I'm excited to report that for them.
Cool, though where we outperformed the industry.
You got that you're talking kudos, so too strong, but there's some openings on the G. By guess what I'm David opened I can go get the money.
I gotcha.
Oklahoma has been driven by getting a possible well model yet again on the Walmart is excellent.
Mike.
And embargo man.
Our concern myself also to be more careful.
Okay.
Yeah, and I can see that.
Yes.
Hey, Guy and visa.
Unless city go to D C to continue.
Six months I'm going to LNG and then on the bank.
It is not exiting an.
Are you crazy, but the body have made us I won't guess football talk toyed with basketball.
Well first of all I'll say, it's $39 3 million bonus.
At present, the leaving you all.
Oh about 30% or about the previous yet possible.
We felt comfortable to say just a little over six points of 9%, while facing headwinds could even buy nothing called eight plus into pricing.
Golf September .
Is he going to 90% complete but.
But it's down to 4% that's on top of.
Two points to 9%.
We are especially pleased to bite on that topic.
Segment, EBITDA monthly average of more than 700 basis point.
The Beach, we did EBITDA in your kitchen concept of idiots.
Economic downtime.
That's why from a previous on Cogs.
We believe though.
Could you just kind of dogs Guinea.
Yes.
So it's bound Colombo sushi restaurants, well have to take some time.
Much more evident to me that would be helpful.
Oh, we don't do any of the PD one.
At the holding company from peak to trough.
<unk>.
Only on that score opportunity, each who they need to buy I'm pulling out all the buddy who publish them.
Looking at a lot, but it's pretty much.
We are pleased that has not stopped.
Michael.
60 basis points, if you don't Wanna Yeah, Yeah.
Confounding by six days on top.
A 50 basis point improvement.
In the prior year quarter buys that you put in an additional three technology research which was.
Well, it's not just a one time benefit.
Well. Thank you for your long term tailwind for <unk>.
No.
Yeah.
Due to ongoing pretty strong about.
Cost of goods sold.
Well since.
160 basis points compared to previous year.
Luxury responsible for the yellow button yet.
And I'll leave it at all but it's probably too.
Martin.
But it is difficult to predict.
When we can expect some moderation in commodity cost.
This ratio to be permanent.
And remain optimistic that we can achieve the margins we saw in the previous year.
We enter a more normalized and button.
I've just mentioned is enough on this call.
With these key areas of.
Oh gosh I felt like you've seen you Paul lots of two money G&A expense.
Well, we're the only company.
Yeah.
People.
So that's done well.
Well maybe.
We did not control mindset.
Uh huh.
This does not mean that.
Yeah not opportunities okay.
Hustling people savings.
Right.
He's the ideal fit.
Good Scott.
The bus the profitability for us either to Liberty G&A cost against an increasingly not just office.
Well it used to do about it will be a multiyear process.
We are proud to announce app.
I'm, making some progress.
This call.
Keep in mind is that improvement in G&A expense as a percentage.
Since all of about 100 basis points compared to prior year.
I'm, particularly impressed by that seems awful to.
To control the cost and the pool has achieved the leverage lending.
No I think that appeal.
Continuing with the change in.
G on the line items.
I'll, let you on their strategy.
Negotiate existing contract.
And the two classes take 30 months.
Which will allow us to minimize the Ohio.
Although support center employees.
I believe in to the allocation and I'm proud of the company, let called operation.
Ladies sportswear.
Turning to development, we opened two new locations across the globe.
The modal biomedical in Bloomington, Minnesota.
Judges Gpus.
Yes.
Subsequent to the end of the quarter.
Opened almost illogical, if your allocation to the CFO .
As I'm sure you had all of our peers and cold.
Construction on the panic in the days of being a headache for them.
Two of these units.
He may not even somewhat unusually young open edge.
Okay.
He believes that the last things behind us.
He's got 23 pipeline.
Some of them.
We typically make false news app.
Yes.
Additionally, we are very pleased by the audio performance all the teams are pretty good.
It's great to see all that sounds right.
This is a model of America.
Indicating national portability and the appeal.
Got it.
And the judge excuse me I'm going to throw out there hunting.
Continued to show the east coast market tremendous potential.
We currently have four unit under active construction and assume a breaking ground later this month.
You can assume Melissa opening expected in Q2.
Yeah.
Another unique growth guidance, we provided in the last earnings call.
Actually I'm very excited to announce.
We haven't made a significant progress and put them into some of our new weight restocked.
What I'm comfortable.
And expect to begin.
Coco.
So we don't have an immediate impact on customer satisfaction.
By improving leading to time, okay. Thank you.
We hope will be translated into improved at least one eight well yes.
We can beat that.
He is our newly won program platform.
Not only will we have great traffic.
Great.
We can do but yes.
Maybe to be able to begin.
The name of it well targeting the market for Covid.
Most of the time.
Well when we bought the program has been effective.
And driving frequency.
The gross.
To meet Amy do you want to throw at them like the polo over there some utilization.
Got.
He brings a new check that our marketing efforts.
I'm talking about we began targeting the market marketing efforts, specifically geared towards first time guests it's simple.
But it's too early for us to discuss that yet.
We believe that.
Yes.
Two have been just kind of go by geography.
You've seen among adult closest competitors.
Sure do you see any pickup on the Jumpstarting disease again remains a key pillar of our marketing strategy.
Oh yeah.
Before I hand things over to you Jeff.
So that's enough about me.
But I think I put up from 37%, possibly cold December .
Finally, I'll directly assigned to one of our team members at our restaurant support Center.
The great work they do every day to create the magic that is a correct statement.
And we saw anatomical about suggests to briefly discuss on what final turns out equally yes.
Yes.
Thank you Jeremy.
For the first quarter total sales were $39 $3 million as compared to $29 $8 million in the prior year period comp.
Comparable sales growth as compared to the prior year period was 6.9% with regional comps of 10, 3% in California, and two 1% in Texas.
Turning to costs food and beverage costs as a percentage of sales were 31, 6% as compared to 30% in the prior year quarter due to food cost inflation, partially offset by pricing taken over the course of fiscal 2022.
Labor and related costs as a percentage of sales decreased to 31, 9% from 32, 5% in the prior year quarter.
This decrease was due to incremental efficiencies created by the implementation of technological initiatives.
While our sales leveraging from pricing taken over the course of fiscal 2022.
This leveraging was partially offset by wage increases and incremental preopening labor.
Occupancy and related expenses as a percentage of sales were seven 3% and were largely flat year over year compared to the prior year quarter seven 4%.
Other costs as a percentage of sales increased to 13, 5%.
Third to 12, 1% in the prior year quarter due to increases in preopening costs advertising and promotional costs and repair and maintenance costs.
General and administrative expenses as a percentage of sales decreased to 16, 9% as compared to 18% in the prior year quarter.
On a dollar basis general and administrative expenses were $6 $6 million as compared to $5 $4 million in the prior year quarter with the increase largely driven by compensation and partially offset by reductions in professional fees and insurance costs.
Operating loss was $2 $2 million as compared to an operating loss of $1 $3 million in the prior year quarter.
As a percentage of sales operating loss was five 5% as compared to a loss of four 2% in the prior year quarter.
Income tax expense was $10000 compared to $12000 in the prior year quarter.
Net loss was $2 $1 million or 21 cents per diluted share compared to a net loss of $1.3 million or 13 cents per diluted share in the prior year quarter.
Restaurant level operating profit as a percentage of sales was 18, 2% compared to 19, 5% in the prior year quarter.
Adjusted EBITDA was zero point $6 million compared to zero point $8 million in the prior year quarter.
Turning to cash and liquidity at the end of the fiscal first quarter, we had $26 $9 million in cash and cash equivalents and no debt.
Lastly, I would like to reaffirm the following guidance for fiscal year 2023.
We expect our total sales to be between 183 and $188 million.
We expect general and administrative expenses as a percentage of sales to be approximately 16%.
And we expect to open between nine and 11, new units with average net capital expenditures per unit of approximately $2 $5 million.
And with that I'd like to turn it back over to Jimmy.
Thanks, Dan.
This concludes our prepared remarks, you'll know how can you talk about any questions you have.
Open it up please open the line for questions.
Minder.
The Q&A session I may answer in Japanese before my disappointment is translated into English.
Please bear with us.
Thank you ladies and gentlemen at this time, we will be conducting a question and answer session. If you'd like to ask a question you May press star one on your telephone keypad confirmation tone will indicate your line is in the question queue.
You May press Star two if you would like to remove your question from the Q4 participants using speaker equipment. It may be necessary to pick up your handset before pressing the starkey.
Our first question comes from the line of Andrew <unk> with BMO capital markets. Please proceed with your question.
Hi, This is Daniel called on for Andrew Thanks for taking the question.
When we think about the results in the quarter. Our math suggests your comps slowed throughout the quarter to 2.5% in November what do you attribute that to and what are you tracking quarter to date or in December .
Thank you don't get a full yeah Kristen he's out on me to answer your question in Japanese.
Quite a few things I'm gonna comprehensive.
But I know.
I know you coupons in Patterson, and we're hoping to paas internal complement that with any kind of step.
I guess I know control topic and importantly, there okay. That's another 500 sky.
The question comes down to only one month of Christopher.
A couple of microphones.
In terms of our comps we were exceptionally pleased to see that.
In this environment, we were able to achieve a six 9%, particularly because our traffic was up 4% over the course of the quarter, which as everybody knows in this environment is.
Pretty rare my company I don't know, who got all kind of on a Q1, that's coming up.
Uh huh.
If we can determine the country, although none of them I think they.
Mike I don't know what it is in our pivotal Moxie, Germany, UK forget anymore. I don't know my prepared remarks, Mohan I supposed to give them a kokomo excuse me thinking about uniquely come to a physical second opinion any country can you just go through it.
Welcome to the.
I said, we could talk a little bit ago told me a while ago.
Oh therapy called putting giving eco domino if.
Okay.
And so looking at industry averages like those provided by Knapp track over the period that was our Q1, it's pretty clear that our peers in the casual dining space are down and traffic and so.
Again, the fact that traffic is up for US is a great sign for our concept is a great sign for strengthening consumer but that being said.
Jim you mentioned in the prepared remarks, our focus for fiscal 'twenty three is could it be in terms of <unk>.
Capturing first time guests in this sort of environment. It's only natural that people are going to reduce the frequency of their out of home.
Dining vacations, and we've been able to remain one of them for remaining dining occasion for our for our guests, but for us to maintain the traffic growth that we've seen in the last quarter. We think it's imperative for us to capture first time guests.
Just is there anything you wanted to add.
No I think the the traffic we were able to get something where we're very happy with getting people in the door.
As is the first step and we've been able to do that we've been able to increase the number of people coming in by 4% over last year and a very very tough environment. So you know, we're not really going to give your monthly comps and I know we did give.
September and October and on the last call. So you can obviously do math yourself, but.
You know, we're very very happy with where the comp came out for for the first quarter of our fiscal year, especially compared to our peers people are still coming in.
And.
Ben said, if people were going out three times now, they're only going out too. It appears based on the numbers that we've been lucky enough to remain one of those two dining occasions, where people do choose to get away from home.
Got it that's really helpful. Thank you and one other question for me why not.
David goals for the year as G&A I'm curious on what your plans are on a multiyear basis, you've guided to 16%.
Sales for G&A as a percent of sales for the year. What do you think is a reasonable way to get to longer term are you expecting a linear progression down or plan for G&A investments.
I'm expecting near progression down you know, we're not going to give any guidance past. This current fiscal year, we are a growth company.
Do think that our G&A is elevated and as we've said many times on.
On these calls and in meetings with investors at conferences and whatnot that we one of my goals. My top goal is to get it down we did see a little bit of leverage when you compare the first quarter of this year to the first quarter last year, which we're very pleased with it but it's not a trend yet.
And we're going to continue to guide towards the 16%. The number came in where we expected it to for Q1. So there were no surprises but.
Stick with the 16% for now I do expect that to get better in future years, but I'm, just not able to quantify that at this time, but.
Jimmy I also said in the prepared remarks that we're also not going to compromise investments that we need to invest in our company for future growth, but there is room for improvement and that's a promise that we have made to <unk>.
Body and that's a promise we're going to keep I just can't quantify it for future years right out past fiscal 'twenty three.
Got it thank you very much.
Welcome.
Our next question comes from the line of Jeremy Hamblin with Craig Hallum. Please proceed with your question.
Thanks.
I wanted to just come back to the traffic versus menu pricing versus mix.
Of of the commentary for for November .
In November quarter in terms of I think that I calculate close to 8% menu pricing that you would've been carrying.
You know throughout the quarter before you took this December price increase.
And if traffic was up.
4% does that imply that you had a fairly significant mix shift.
During the quarter.
What do you suggest.
Oh go ahead go ahead go.
Go ahead Jeremy.
Okay. Thank you.
Any cost at our normal colonic Cuban contacting that didn't get them, all Karnataka and we talked about on Opex on the.
Marbury casual.
Got you.
And the telco commentary.
I don't know what other contract put it up and that's going to just figure out how much of the Q4 to put out because we're happy to see my son in mind to put out a day or how many published on Monday.
Q1, your question I'll say, a couple of electrical car Ts.
She is just a second.
So in terms of Q1, we did see a little bit less of flow through from pricing that we have in past quarters that being said, we did see average check growth.
Quarterly sequential basis from Q4 to Q1 and so.
It's not like there's aggressive tech management trucks are still growing and the <unk>.
Her person play consumption over the same period was flat as well.
Certainly.
Point of focus for us, but given that this is just.
Results from one quarter, we don't think this is necessarily indicative of a trend yet.
Okay, Gotcha, and you and you are not providing any color on kind of quarter to date trends, whether or not you know because I did want to ask you your 7% price increase that you had.
Took in December whether or not that's having.
Any impact on traffic trends.
And then the second.
Park, that's kind of tied into that is.
You did see a pretty healthy jump now the last two quarters in food and beverage costs, we know that there's a inflation out there certainly commodities.
But I wanted to get a sense for you know.
Or are we getting close to where you feel like that that peak in food cost you know inflation has happened.
And with that incremental.
7% that you took in December is that you know hopefully going to balance out.
Kind of your Cogs as a percent of sales.
So in terms of let's take the first part of your question, which is about December and the price increase in early indications that we've seen or is it.
The response by gas has been just fine.
Previous price increases we've taken we're seeing pretty much the same pattern.
There's little to no negative response to the pricing increase.
We're very lucky where our pricing is compared to our competitors. We do have headroom to take price and we did take that price to 7% at the beginning of December so we're.
We're happy with what we've seen so far in terms of no negative response to that but no.
We're not going to give any any other more color December is only only close five days ago. So we're not able to really give any more color as it relates to the beginning of the second quarter.
As far as your question on Cogs.
I am optimistic that we're reaching a peak, but I'm not banking on that.
Do see some things continue to go up.
We have seen sequential month to month inflation since the.
The beginning of the year and even as we go back into Q4 of last year and.
I'm planning for that to continue to go up which is why we took the price the price does not fully offset the impact of what we're seeing with inflation and we don't expect it to but it is helping.
And one thing that really encourages us just because of that traffic to a 4% during the quarter is that you know.
Guests are are reacting pretty favorably to the pricing really isn't impacting whether or not they want to come visit us but.
I'm I'm optimistic, but I'm not optimistic enough to tell you that I believe that we've reached the peak there are some positive signs out there.
But.
Again same thing on the last couple questions does not a trend yet.
Yeah, just to add on that note about commodity inflation.
As we mentioned earlier what are the few concepts that are posting positive traffic in the casual dining sector and I think you know.
Really a big part of this is due to our exceptional.
<unk> proposition and that includes a lot of guests that are trading down from more expensive sushi restaurants and so.
This week, we sort of see this as a long term investment in terms of growing our overall restaurant base, which is an opportunity that I. Just don't think other people are seeing here and so while there may be short term commodity pressures.
And yet having this excellent value I think it's going to position us for that much.
More success.
Once we see a normalization in inflation.
Got it and then just wanted to clarify another comment from the script.
Which was off of unit openings and kind of the cadence that you were expecting so I think what you said was that.
But you had.
No.
Four.
Units actively under construction.
Then a couple that are additional that you are going to expecting to break ground by the end of the month.
In terms of completing those getting them open because I know it was as you noted that they've they've you know, they're a little bit behind schedule for a variety of reasons construction permitting delays HVAC systems whatnot.
But can you give us a sense for your expectations around you know how many you've opened one quarter to date. Thus far you know are you thinking you're going to get to more open. This quarter and then you know just in terms of even for the back half of the year or is that gotta be even split is it going to be back half weighted any color you can provide would be super.
Helpful.
But the cadence any cost Oh my goodness.
The slide you can put a peanut butter properties I think that underscores Imogen in fact my own terms.
I'm skipping according to IATA took with anthem.
That's almost a.
And our courtyard in my throat.
Q3, any kind of feel like Tempur, Sealy, North America, Muscat Oman Qatar.
Oh shoot.
Hello.
<unk> opened facility and an accordion now it looks like you.
On a full hunting opens with you okay.
Mcclatchy and open to get along with you Mike.
But it was like Macquarie, even rock would put them on it.
Okay.
And in terms of.
We're going to repeat what you just mentioned and we're gonna be repeating ourselves from the prepared remarks, but what we can say is that we've got for units under construction. We've got two that are just about to break down break ground, where you've already opened one to date in Q2, we expect a couple more in Q2, one or two and the remainder will be in the back half.
One thing to keep in mind that the actual construction times haven't really gotten longer that the delays in openings that were seeing are largely do the inspections and permitting where for example, before if you had an inspection you could get a follow up inspection that I can say now this is like a two week wait and Thats a lot more typical in urban markets versus <unk>.
Suburb in markets, which is why we have a lot of optimism for the back half in terms of not.
Not seeing that sort of hiccups that we saw with say Philadelphia.
And according to the court.
Hum.
Yeah I.
And I think on a Monday about putting it in the demand went down a couple of them kick angle on a similar question I was hoping for more of a medical monitor who doesn't repeat them all that attempt to get them more quoted on alumina mondello, who donate some really helpful indicators.
And then the other thing that gives us a lot of comfort is that the remainder of the of our pipeline are largely in new build outs and so that just generally makes for a much bigger processors.
There is very rarely issues with gas lines are having to get the floor level or anything like that and so that's another tailwind that we have for the remainder of the pipeline.
Got it thanks for the color guys.
Best wishes.
Thanks, Jamie Thanks, Jamie.
Our next question comes from the line of Sharon Zackfia with William Blair. Please proceed with your question.
Hi, good afternoon.
I guess circling back on inflation, Jeff could you quantify the commodity and labor inflation, you saw on the quarter and what you're expecting for the year.
Hi.
We haven't quantified it I mean, you can see the math quarter over quarter, what we've seen.
We're very fortunate this year on the wage inflation or in this quarter.
As we also said in the prepared remarks, I think with the price increases.
As well as the the three initiatives the technological initiatives that we implemented which we had mentioned give us about 50 to 60 basis points of labor.
Leverage, but with him along with the pricing we were able to come up with a better quarter. This year from a labor perspective. So you know I have and then on the food you already mentioned kind of what's going on with inflation I'm, sorry that I can't quantify what I've seen.
But as I mentioned, I'm optimistic fingers crossed but not promising that well we'll see.
An improvement or do you stop.
It's a leveling out of food cost.
And just to follow up on that I think he said the 7% was that it wasn't enough to cover all of the inflation, you're seeing so should we kind of read into that to anticipate.
In our restaurant level margins kind of being under some pressure all year or.
I know there are other initiatives that you guys have in that you've been working on them and the ability to kind of hit at that.
That could help bolster our margin.
Just kind of looking for some <unk>.
Clarity, maybe on what the messaging that youre trying to get across there.
Yeah, I you know I'm, a first thing remember that our Q1 is our seasonality wise is our lowest performing quarter from a from a margin perspective. So you know as we go throughout the year, we do expect margins to improve.
I do not see.
Much more downward pressure on margins I really don't I feel like we've reached the peak.
Or getting nearing the peak both in terms of wage and cost of goods sold I mean, if you really look at the numbers. It was really all all Cogs this quarter really that that impacted.
Our bottom line and our margins.
Got it.
We can get or.
What control we have.
I think we have some control, but a lot of it's out of our control with the macro environment. Once once inflation comes down or inflation eases I really think that our margins are going to see some improvement.
And end and when that's going to happen, but I can't say, but I really feel like we maybe the worst is behind us as it relates to that.
Okay, and then I'm sorry, if I missed this but I don't think I heard any update on loyalty and then membership trends there and I'm just curious as you're continuing to generate the positive traffic are you having continued success converting folks to loyalty and is there any update on frequency.
Royalty.
Okay.
Yeah. So the number is.
Loyalty rewards member membership growth rate has pretty much been in line with the exceptional rate that we've been seeing over the last year or two we're really pleased with that in terms of the rewards program. The bigger news is really the fact that we're able to begin testing with punched in this quarter up until now we've used.
And in house platform and its been very useful in terms of driving frequency increased tech spend but in terms of data leveraging or targeted marketing, we haven't been able to use it and so being able to switch to that it's really kind of a paradigm shift in our in our rewards program and our marketing strategy and so that's something.
Yeah.
That's going to be the big news for rewards this year.
Okay. Thank you.
Thanks sure as a reminder, it is star one to ask a question. Our next question comes from the line of Joshua Long with Stephens. Please proceed with your question.
Great. Thank you for taking my question I was hoping we could dig into some of the either initiative platforms tools and just your overall approach in terms of going after that first time gap and getting them into the funnel. It seems like that's a big opportunity you've talked about it a couple of times I imagine that there is either some tools marketing or some sort of approach that you're bringing and without giving away too.
Much I'm just curious if you can talk about it high level and how youre thinking about that unfolding as we go forward.
Now that you're getting on the Permian.
My Google Ecopetrol.
They want them up and put in a pretty good one now suddenly it there's still a short distance, putting Michael Knott County tornado skeptical eager to do.
Let's see if I can get them.
There are no marketing on our spending when you talk about what kind of <unk>.
You might be.
Looking at that on a month to kind of caught up and I know you broke up I hope it can match they can do and of course, they have kind of like a month.
And in terms of our targeted marketing.
At a very high level, it's going to be.
Heavily focused on search engine optimization, so whether it's Google or yelp will be able to drive that many more guests who are interested in Japanese sushi well.
Yeah, It will be top of mind, because it will be the topic of waste and so that's something that we're excited for.
The increment the incremental spend that we spend on targeted marketing is not going to really.
And any change in the overall marketing budget, it's going to be more we're optimizing we're always optimizing our marketing efforts and.
We'll be able to reallocate some of those savings towards that targeted marketing, which which goes very far.
In terms of the effectiveness on a dollar basis and so yeah.
That would be a high level I don't know.
And could you talk a little bit on a pretty long put them out there are no new debt or kind of destiny.
But neither of the money put almost all of it most of the automotive came up from there.
But youre not going to get at Disney understood.
And then with the rewards program platform punch.
We're really going to able to slice and dice our consumers in a way that we just have never been able to do that before so for instance, if there gets better.
We know that the noodles every time when we can send them a noodle coupon for half off at four P M, which has historically.
Shoulder period for US people ask is you've got incredible wait times, how are you going to be able to drive comps in these tremendous over performing stores and this is one of those opportunities. We think it's going to be harder to get somebody get additional parties in the door during eight o'clock, but that's certainly not the case and four o'clock and so that's one of the other big things that we're excited about.
Very helpful. Thank you for that but maybe coming back to the inflation topic from a slightly different angle can appreciate the current environment and I know.
That we've got our entire team and just relatively new to the role here, but one of the things. We had talked about was just maybe some supply chain optimization or just opportunities there and I was curious if you could again high level to talk about any sort of initiatives youre working on there.
Leveraging the core brand strength and the broad basket you have but also maybe any sort of near term wins or opportunities around where there's room to optimize or maybe drive some efficiency over time that you just get things in line to help scale the brand.
What are the things that I really want to look at is.
Getting more and more of our basket into a broad liner I think that that will really help us.
I think there's some opportunity there.
One of the things that we've had trouble with over the last year was having to buy some of our.
Fish that we buy from suppliers that we're not a regular suppliers and because during the pandemic somewhere a regular supplier tried to throw out a lot and they weren't able to fulfill some of the orders that we needed. So we had to go to the smaller houses and didn't get greater prices. So I'm, hoping that that starts to come back in and it has actually in fiscal 2023 has started to come back.
Back in our favor.
But between that and shifting to a broad liner and really just looking at all of our contracts and this is something that I'm doing with G&A, but also I'm asking in the purchasing department to do it for.
Our food.
It just is as well and I think that there's opportunities to go back to our suppliers and leverage the growth that we're going to be seeing over the next few years and if we can maybe get into some little bit longer contracts with some people, where we promise them.
The growth in the same sort of growth that we're promising out to the street right now and they can see that there's an opportunity for them to make a lot of money in the future I think we can leverage some better pricing and don't know how well we've done that in the past because you know I am still relatively new but I really want to push those types of initiatives to see if we can.
Reduce those costs and get our Cogs down somewhat even in an inflationary environment I think that's possible.
We do have a number of things that we're looking forward to in the back half of the year such as.
Improved supply lines for select items, which means that.
There is no compromise in quality, but we will see a certain amount of savings.
Those are savings sphere in there, they're not going to be enough to really move the needle.
What's tricky about our basket is that we've got over 100 inputs and it's one of the reasons. We were so resilient in in the past year in terms of our Cogs, We had our all time best but it also makes it trickier to there's never just one big thing that you can address and so like Jeff mentioned being able to move to a broad fighter is going to be a tremendous opportunity for us.
That's very helpful. I appreciate that and one more kind of housekeeping item for me in terms of just how we think about the price that youre running now.
You had mentioned taking that incremental pricing window here in December .
Can you remind us when and when and how and at what pace you would think about more pricing in the future just kind of what the philosophy of the approaches there and yeah. Thank you.
Given that we just took price in December I think it's a little bit early to discuss future pricing decisions, but I think the philosophy is going to remain largely the same.
Historically, we've taken price about twice a year typically to offset minimum wage increases, which we've already done and then we'll adjust based off of inflation, but given that it's impossible.
Predict quite inflation is going to end or what degree it's going to look like.
It's hard for us to give any numbers at this point, but that being said, it's really clear that the traffic here is being driven by the value proposition and so thats certainly something that we don't want to compromise.
Understood. Thank you.
Our next question comes from the line of George Kelly with Roth Capital Partners. Please proceed with your question.
Hi, everybody thanks for taking my questions.
So just a couple most of my questions have been asked and answered but a couple for you the first one.
You mentioned on last quarter's conference call about potentially sourcing from Japan.
So I was wondering if that's something you're still contemplating and how.
How meaningful could that be to your your gross margin.
Yeah that that's something that we're still looking forward to we're in the process of exhausting.
The inventory, we have with our existing.
Vendors in the agreement that we have in place, but that's something that we continue to look forward to I think you've been in the last call. We mentioned that we don't expect that I expect to benefit from that until the back half of the year and the benefit is going to be dependent on forex, but right now I mean, the American dollars, so strong that the benefit teams meaningful.
And some of that challenge to you, we'll be making sure that if we do find a supplier that we're happy with in Japan that we can get wood I'd really like to get that into the broadline distribution once we get that.
A little bit more streamline too and that will really help as well but.
So a lot of the suppliers in Japan from my understanding wont be able to distribute through abroad miners. So we may have some challenges there, but that's something that the team is really working through right now to figure out the best the best path to take.
Okay and then second question for me is on just your staffing levels right now curious if you're seeing much change if it's becoming easier to find people what kind of wage.
Wage pressure there is et cetera.
If you could expand on any of those thank you.
Yeah.
We live in and conquer Mont you feel I know Q1, net cumulative whatever he's only in closing some of them, but some of them are temporary.
No management, then it got strategical partner that we hadn't planned on it I don't know how you appreciate the clarity.
I don't know EPS, something easy to convert demand.
Genzyme.
So anyway, I don't know for the quarantine autonomous picking them up against that little more than that and I. Just got the normal homeowner business outside okay doesn't think intimacy heating capacity didn't dwell on it.
Well, if you do any one of them.
Recruiting and if the operational Zimbra kind of comp I think you kind of thinking on if you're doing a holding them up.
In the past earnings call, we mentioned that at our hourly.
For our hourly positions we were about 95%.
I would say that today, we're at 95% to 100% at all of our restaurants were in an extremely good position, we're not seeing any quarantining.
Not yet.
No corn hitting thats impacting operations.
During this time, we had seating limits a shortened hours that's certainly not the case now we're exceptionally happy with the staffing situation and.
We're very proud of the work that's being done by our recruiting team our ops team training HR and just on that note about staffing I know that there is.
The fast act is probably top of mind for a lot of people on this call, especially because we have.
California is our largest market I just want to reassure everybody that's listening.
The legislation is written it does not impact us.
We're simply does not apply to us.
Some people say that look if everybody's wages are going up then your wages are going to go up to whether or not your impact.
Or not you're legally falling under that category and to that I'd say if that were the case then you wouldn't have any people working in say, Texas or New Jersey for $2 13 centers the server.
You know.
Because they can get a guaranteed $8 elsewhere people clearly go for the.
Server positions, because they're very lucrative or tips and with our tips. We're one of the best paying employers in the sector and so the fast act for us.
Not a concern I think it makes us more competitive if anything.
I thought our management on our pipeline and current demand and healing Judy I.
I don't know why do I put them again I just don't have to go through the proton AR silicon per se, but they keep on what is under our current debt to kind of get them up when it comes to mono in Peru.
[noise] applicable E. Heiko, that's got EMEA, particularly to see couple of thinking about political but that gives you a good chunk of it.
Even though how can you give us and then in past calls we've mentioned how the management pipeline as one of our key considerations in terms of.
Our unit growth rate.
We're happy to say that the management pipeline is exceptionally strong.
The opening delays that we've seen to date are because of.
Permitting issues or inspection for certainly not because we don't have management and in fact, those delays have allowed our management trainees to get that much more training and so we have a very strong class for this year or next.
It's not a concern for us so and so.
That's certainly not a gating factor for continued aggressive growth.
Okay understood. Thank you.
Okay.
Thanks George.
There are no further questions in our queue. This does conclude today's teleconference. Thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.