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Hajime Uba

Thanks, Ben, and thank you to everyone for joining us today. We are very pleased to link in the new year by reporting our strong Q1 results, including positive comps of 1.8% and the six exceptional new unit openings. I'm especially proud to be able to amount from adjusted EBITDA margin of 5.5%, representing a 210-basis-point improvement year over year.
I can't think of a better demonstration of controlling what we can control and the significant year-over-year growth in corporate profitability. I'm extremely proud of our entire team and the work that we put into making it possible, which has effectively even if I had to start the leverage we expect as we continue to scale our base.
Total sales for the fiscal first quarter was $64.5 million, representing comparable sales growth of 1.8%, with spreads on the mix of 4.1%, offset by 2.3% of negative traffic. Our cost of goods sold as a percentage of sales improved by 80 basis points year over year to 29% due to pricing and the ongoing efforts of our supply chain department.
Labor as a percentage of sales increased to 32.9% as compared to the prior year quarter of 31.9%, driven by wet inflation, including the fact result, the maturity of fiscal '24 restaurant openings were high labor custom market and partially offset by operational streamlining efforts.
The restaurant operating profit margin was 18.2%, as compared to 19.5% in the prior-year quarter due mainly to wet inflation.
Onto to development. We opened six new units in the fiscal first quarter: Beaverton, Oregon; Tacoma, Washington; Rockville, Maryland; Shelly Hill, New Jersey; Bakersfield, California; and Fishers, Indiana. We currently have six units under construction, but continue to expect the majority of this year's remaining openings to be back half rated.
In our last call, we have discussed how we're excited to be part by our recent openings, and we are pleased to share that the subsequent performance has been excellent and supports our belief on new market opportunities.
We have discussed the two markets, in particular, the Pacific Northwest and our Bakersfield, California opening, which highlights the opportunity in DMAs that were smaller than our typical markets. Beaverton and Tacoma continued to outperform our expectations, with Beaverton on track to become a top five store.
I'm very pleased to say that Bakersfield's performance is as strong as ever, too. As a reminder, Bakersfield is a critical test to market for us as it presents an entry into a significantly smaller market than any of our previous openings. Historically, our site section has focused on the top 40 or 50 lag for the DMAs in the US, and Bakersfield is around the top around the 120th [largest].
While we have always been confident about doing well in Bakersfield, it demonstrated success after opening has given us so much more confidence in pursuing smaller high-potential markets. We see the potential long-term impact on growing our overall white space potential, opening in smaller DMAs will allow us to better manage conserve headings rather than in filling existing market while maintaining historical cash on cash returns.
Our goal is to come 50/50 pipeline split between new and existing markets over the coming years to manage comp waterfall and opening up of smaller DMAs, will make it meaningfully easier to fit some new market proportion of the 50/50 equation.
Moving to new initiatives. I'm pleased to share that new reservation and self-seating system is progressing as scheduled, with our fast investment test expected in February. This will be a very significant improvement to the guest experience as we currently do not offer reservations.
Today, yes, you can [ultimately] check into different waitlist, but cannot give us specific time to dine. With the liberation system is coupled with a seating system, and we believe the implementation of these systems will eliminated the need for a dedicated cost operation, as well as (inaudible)
Additionally, in conjunction with the new reservation and the self-seating system, I'm very happy to share for the first time that we are nearing the rollout of updated table-side ordering panels, along with the redesigned to push button [Mr. Fresh 2.0], which is much easier to use.
(inaudible) can spend up to three minutes explaining how to use the existing Mr. Fresh (inaudible) to first-time guests. And so, this is an opportunity for a labor tailwind as well as an improvement to the guest experience. The Mr. Fresh 2.0 is complete, and we expect to begin US rollout in February as well.
In terms of promotions and the marketing, our positive comps in Q1 were supported by the successful One Piece and Pikmin IP collaboration campaigns. Due to the timing of license of promotional schedule, we do not have any IP collaborations from the fourth fiscal second quarter, but we're extremely excited for the collaborations. We have great for the back half of the fiscal year.
In place of high collaboration for the fiscal second quarter, we are doubling down on the full customer efforts we have discussed in the last earnings call. Our history is off to an excellent start, and we are very encouraged to see that. Our comps have returned to [political territory]. Our new openings exceeding expected and have us even more excited about Kura's ultimate opportunity in the US.
Adjusted EBITDA margins have hit an all-time high for our fiscal first quarter, thanks to company-wide efforts to control costs. Technological initiatives are progressing smoothly, and we expect that to share the results of our first step-side in-restaurant tests during our next earnings call.
I would like to reiterate my thanks to the entire Kura team, both at the restaurant and our support center, for the amazing work they've done in positioning us (inaudible) on all cylinders. The speed and the comprehensiveness of everyone's efforts have been nothing short of remarkable. Thank you.
With this, I'll turn it over to you to discuss the financial results and the liquidity.

Jeffrey Uttz

Thanks, Jimmy. For the first quarter, total sales were $6.5 million as compared to $51.5 million in the prior-year period. Comparable restaurant sales performance compared to the prior year period was positive 1.8%, and with regional comps of post 7.8% in our West Coast market and negative 0.3% in our Southwest market.
Turning now to costs. Food and beverage costs as a percentage of sales were 29% compared to 29.8% in the prior year quarter, largely due to pricing and supply chain initiatives. Labor and related costs as a percentage of sales were 32.9% compared to 31.9% in the prior year quarter. This increase was largely due to wage increases and restaurant openings and higher labor cost markets. Occupancy and related expenses as a percentage of sales were 7.4% compared to the prior-year quarter's 7.6%.
Depreciation and amortization expenses as a percentage of sales remained flat year-over-year at 4.8%. Other costs as a percent of sales were flat year-over-year at 14.5%.
General and administrative expenses as a percentage of sales decreased to 13.5% as compared to 16.7% in the prior year quarter due to significant leveraging of corporate costs against a growing unit base. Operating loss was $1.5 million compared to an operating loss of $2.8 million in the prior year quarter due to the previously mentioned G&A leverage. Income tax expense was $39,000 compared to $38,000 in the prior year quarter.
Net loss was $1 million or a loss of $0.08 per share compared to a loss of $2 million or a loss of $0.18 per share in the prior year quarter. Restaurant-level operating profit as a percentage of sales was 18.2% compared to 9.5% in the prior year quarter, largely due to higher labor-related costs. Adjusted EBITDA was $3.6 million compared to $1.8 million in the prior year quarter, largely due to greater G&A leverage.
Turning now to our cash and liquidity, at the end of the fiscal first quarter, we had [$107 million] cash and cash equivalents and no debt. This increase in our cash balance is due to the follow-on offering that we closed in November.
And lastly, I'd let to reiterate our guidance for fiscal year 2025. We expect total sales to be between $275 million and $279 million. We expect to open four units maintaining an annual unit growth rate above 20% with average net capital expenditure unit of approximately $2.5 million.
And lastly, we expect general and administrative expense of percentage of sales intimately of 13.5%.
And with that, I'll turn it back over to Jimmy.

Hajime Uba

Thanks, Jeff. 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.

Question and Answer Session

Operator

(Operator Instructions) Jeremy Hamblin, Craig Hallum.

Jeremy Hamblin

Thanks, and congratulations on the strong results. I wanted to just dive into what you've seen in terms of trends here. It looks like you've got, mid single digit improvement on your comps in both of your key markets and wanted to just get a sense for what was driving that it appears as though your mix was a little bit better in the quarter. I think menu pricing was not significantly different from your your last quarter. So wanted to just see if you could provide a little bit of color of that and then maybe a little bit of color on the cadence throughout Q1.

Hajime Uba

Sure. Thank you for your first question, Jeremy. But please allow me to answer your question in Japanese. Ben is going to translate. (spoken in Japanese)

Benjamin Porten

(interpreted) In terms of the improvement that we saw in Q1 over Q4, certainly 11 of the major tailwinds that we had with the successes of the IP collaborations we had with one piece and picked in those were very successful campaigns in terms of price mix. As you've mentioned, price was largely, effective pricing is largely flat quarter over quarter. And so we did see meaningful improvement in mix. We've been talking about having more food focused marketing efforts and this would be an example of one of the fruits of those labors. We've been really talking up the quality of our udon the way that we make it from scratch every morning. And we had a follow-up campaign called The Perfect Pair, which was a combo of an udon bowl and a and that led to significant improvements in mix attached inside menu attachment without any reductions to per person plate consumption. And so this is some of the best mix we've seen in recent memory, really pleased to see it.

Hajime Uba

(spoken in Japanese)

Benjamin Porten

(interpreted) And then in terms of the monthly cadence that we saw, we saw largely the same as the rest of the industry. November was the strongest month for us.

Jeremy Hamblin

Got it. And then just you noted a little bit of change here in your collaboration kind of packages you're thinking about fiscal '25. You're lapping, kind of snoopy peanuts from last year in December and January timeframe, and you really don't have that same kind of collaboration going on right now. As you noted, you've, you focused on kind of food marketing. And I think you've got some, some premium items coming here in the next couple of weeks, but just wanted to get a sense for how consumers were responding to that. And then just kind of a tangent related question whether or not kind of the shift in calendar this year is having kind of any impact on results.

Benjamin Porten

Sure. Well, let me -- I'll speak to the first question in terms of the it collaborations. It's, it's, it's certainly true that Q2 is a more difficult comparison. Q1 to your point, we are lapping peanuts, which is one of the most successful campaigns we've had and we are not running an IT collaboration in Q2. This is and so it is going to be a more difficult comp from that perspective in Q1, knowing that our focus is going to be on cost control and delivering profitability regardless of that headwind. And so that, that's really what we're focused on in terms of Q2 specifically, but looking to the full year and to future years, this is I would characterize Q2 is really just a sort of hiccup growing pain as we pivot to our new strategy, a big part of why we don't have a collaboration in Q2 is simply the timing of different licenses. There wasn't one that we felt really checked all of our boxes. So, sort of the same thinking as how we pruned our lo I going into fiscal '25. And so well, we won't have a collaboration for Q2 seeing the results in future quarters and just how strong the IP S are. I think everybody will, will really be quite pleased with what we have in the store.

Jeremy Hamblin

Got it. And then, and then just the question the impact, there's a shift in the kind of the timing of the holidays this year in December into January and wanted to get a sense for whether or not that's, having any impact, good or bad, you know, on what you would expect.

Hajime Uba

Ben, can I answer the question?

Benjamin Porten

Yes.

Hajime Uba

(spoken in Japanese)

Benjamin Porten

(interpreted) I assume this is the case for pretty much everybody else in the industry, but just looking at the calendar shift, the fact that Thanksgiving came so late into November, we're looking at December and January really as a combined month sort of along the lines of how you treat March and April as a combined month, just given the calendar shifts that are so typical of those months.

Jeremy Hamblin

Got it. Thanks for taking the questions, and best wishes in 2025.

Benjamin Porten

Thanks, Jeremy.

Hajime Uba

Thank you, Jeremy.

Operator

Jeffrey Bernstein, Barclays.

Jeffrey Bernstein

Great. Thank you very much. A couple of questions. The first one just following from a comp perspective, I think one quarter ago you had guided to, loosely positive comps for fiscal '25 but you noted that you were still kind of in recovery mode. So it was difficult to forecast.
It seems like you have some better visibility. Now, I'm just trying to clarify. It sounds like you're saying for fiscal two Q, it's possible that the comp reverts to perhaps a modest negative with the collaboration mismatch. But your focus is on protecting profitability and then you'd expect with the stronger collabs in the back half, you'd return to positive comps in the second half of fiscal '25. Is that, is that a fair assessment of your outlook for the next few quarters in terms of how the, how the comp plays out?

Hajime Uba

(spoken in Japanese)

Benjamin Porten

(interpreted) Jeff, thanks for the question. In terms of IP collaborations. Our Q1 performance is certainly buoyed by the success of One piece and Pin, which we are very pleased with to your point Q2, we're lapping peanuts without an IP collaboration. And so thinking about the comp relative to Q1 is it, it's certainly more difficult.

Hajime Uba

(spoken in Japanese)

Benjamin Porten

(interpreted) And the guidance that we gave at the beginning of the year contemplated this, this is not a surprise to us. And so it was always our plan to focus on operations and driving profitability in Q2. And it's the reason that when we talked about comps, we always talked about it in the full year context. The back half is, is really where the major opportunity lies both in terms of the easier comparisons, the implementation of our new technologies and the IP collaborations that we have in store.

Jeffrey Bernstein

Got it. Very helpful.

Jeffrey Uttz

Add to the other thing that in the in the past was that we have our Q1 competent, we get sequentially better throughout the year. I don't think we anticipated a 1.8% comp for Q1. So you know, that may not necessarily be the case, but like Jimmy and Ben just talked about for the year, we do anticipate that our comp will be a positive number for the full year.

Jeffrey Bernstein

Understood. And then just following up from the cost side of things, again, you focused on profitability in the short term, but inflation can you update us on the food and labor inflation that you saw in the first quarter and what your outlook is for the second quarter and the full year, just wondering whether you're able to leverage those line items as we think about the full year.
So I want to know.

Hajime Uba

(spoken in Japanese)

Benjamin Porten

(interpreted) So just sort of start with the conclusion. Our expectations for the labor for Q2 are to be largely in line with the prior year percentage of sales and for Q3 and Q4 for fiscal '25 to be superior to fiscal '20 four's percentage of a labor of sales. I'm sorry, labor as a percentage of sales.
And so for the full year, we expect labor leverage as well. If you look at our historical earnings calls, you can see that our general experience has been that we, we've seen labor inflation of mid single digits, low single digits, the most recent quarter, we actually experienced high single digits. And so that was a little bit unexpected but the operational implementations, the streamlining that we've put in place, we've already seen very meaningful improvements in sales per man hours and these sorts of waiver initiatives.
The upside is really, it's it tracks along with our seasonality tracks, along with general sales of sales and labor leverage. And so the opportunity presented by the operational streamlining as well as the additional initiatives that we have coming up later in the year, but they really come live in the latter half, the busier half of the fiscal year. So for labor, we're, we're, we're, we continue to be bullish.

Jeffrey Uttz

And then on quality stuff inflation for, but inflation for this quarter on COGP was basically flat. In fact, it was just inflationary year over year. So we're very happy where that is. And I don't expect significant increases or any significant inflation for the remainder of the year for COGS and would expect that line as percentage of sales to remain where it is or even turn down somewhat for the remainder of the year. If you look year over year, last year, we were at 29.8 and this year we're at 29. So that's a big improvement over last year and I expect it to potentially, it'll stay the same or potentially get a little better if we have some stars aligned and things go our way.

Jeffrey Bernstein

Got it. And my last question was just on the labor initiatives. I think you guys previously talked about how you already achieved maybe 100 basis points from back of house initiatives. And I think you were talking about how maybe the reservation system and the self seating system had potential for another 50 basis points of opportunity. I'm just wondering how that's tracking and maybe what, key performance indicators you'll be able to share with us over the next few quarters to kind of see. It sounds like your first one is in February where you're going to be rolling that out. So just what kind of expectations do you have over the next few quarters in terms of the initial impact? Thank you.

Benjamin Porten

Yeah. So we're really pleased with the operational improvements. We mentioned that we started them in fiscal '24 rollout was complete by September. And so they're, they're live in pretty much every restaurant, in terms of the productivity beyond a doubt, we've seen very meaningful improvements. We're very, very happy with the results that being said, we didn't see, you know, labors and percentage of sales improved year over year. Just given that the high single digit wage inflation was more than we'd expected. That being said, the nature of the improvements is it's a station consolidation and so you can go from five people to four people or four people to three people, but you can't really go smaller than that. And so the opportunities where you can go from 4 to 5 or I'm sorry, 5 to 44 to 3, those become much more frequent as we approach the summer and we enter the summer. And so the upside from those that 100 basis points is you're really just see that in the back half of the year in terms of the 50 basis points that we expect from self seating and the reservation system that that remains unchanged.

Jeffrey Bernstein

Thank you very much.

Hajime Uba

Thank you, Jeff.

Operator

Jon Tower, Citi.

Jon Tower

Great. Thanks for taking the questions, guys, and Happy New Year to you. So maybe just, I guess a couple of nuances on the quarter itself, the fiscal second quarter. Just to on the modeling side, I believe in January, you traditionally take so a round of pricing and it didn't sound like you spoke to that yet. So, did you take any pricing? Number one and number two, last year there was Leak day. I can't recall whether or not that was included in your same store sales number or if it wasn't. But could you speak to both?

Benjamin Porten

In terms of the leap day, we adjusted for it, so it was not included in our same-store sales.

Jon Tower

Okay.

Jeffrey Uttz

And then on the job on pricing, we took about 2% price the first week of November.
And so the effect of pricing for Q1 that just ended is about 4.5%.

Jon Tower

Okay. And similar. Okay. So we'll have a little bit closer to 5% say in the fiscal second quarter because I don't think anything is rolling off unless there is.

Jeffrey Uttz

There is a little bit rolling off on January 1, just rolled off. But you, your number around 5% for effective pricing for Q2 is about right. A little bit over five. And then in terms of additional pricing, price increases, we typically take them as you know, beginning of the year and in the middle of the year, we took the beginning of the year one early as I mentioned the first week of November. And right now, we don't have any additional plans to take anything in the summertime, but we typically do, but that is to be determined as we continue throughout the year. And I think we all hope that we have to continue to provide the great value for our guests.

Jon Tower

Got it. Cool. Thank you for that. Maybe just zooming out a little bit. I'm a little surprised how conservative your guidance appears on revenue for the year again. I mean, just based on where you guys came in the fiscal first quarter on the you know, obviously same store sales and aggregate revenue front of 25% year over year. The guidance itself would imply a fairly aggressive slowdown in the back half. So I'm just curious, I know you have some tough comparisons and some IP collabs that you're not this year. But is there anything else we should think about with respect to new store productivity perhaps opening in markets that are maybe more challenging or you're expecting a higher level of cannibalization that might be weighing on the revenue growth on a year over year basis.

Jeffrey Uttz

Yeah. So Jon, the reason behind the guys and we have made in the last call that it was conservative. The [$2.75] to [$2.79] is conservative. I think we're all very bullish that that can be beat some point. But if you take the clock back to last April in our call, which when we raise our guidance and then in July, we had to lower the guidance. We want to be very careful about being in a position of that happening and want to make sure that when we do a guidance raise, that we do see a trend and we don't jump the gun too quickly on a raise and it really has nothing to do with worried about productivity, productivity, restaurants or any additional cannibalization that we're not already experiencing. We've already talked about in the past. So there's no out there that are causing that number to be where it is. It's because we would all like to make sure that we're seeing a trend before we put it out there and raise our guidance and want to be, we do raise our guidance. We can keep our promise to the street and not have to reduce three months later.

Jon Tower

Got it. Makes sense. And I appreciate that. Can you maybe then just pivot a little bit to marketing? It sounds like obviously fewer IP collaborations in the future, perhaps more potent than ones you've done in the past. Maybe could you speak to the differential and spend expected on those versus, at least year over year in the back half. Number one and the number two, your approach to marketing in general, it does sound like you're focusing a little bit more on the food side. I know you, Ben, you mentioned earlier, the perfect pairing promotion that you did that helped drive mix during the period. So, as consumers and frankly as investors is that how we should think about some of the marketing going forward as more of these perfect pair promo or something like that running through and being promoted through social media rather than these IP S going forward for these.

Benjamin Porten

You can assume that when we don't have an it, we're always going to have some sort of alternative going on whether it's something like a perfect pair or 15th anniversary campaign or holiday Strat you know, are, are, are pivoting from a constantly packed calendar from of it. Collaborations doesn't mean that we're not going to continue to have a packed marketing calendar.

Jon Tower

Got it.

Hajime Uba

(spoken in Japanese)

Benjamin Porten

(interpreted) And then in terms of the cost difference between say something like the perfect pair or another food, food focused campaign versus an it collaboration. The difference would be about $150,000, $200,000.

Jeffrey Bernstein

To the better --

Hajime Uba

$200,000. $200,000.

Benjamin Porten

$200,000. It's $200,000 more expensive when we collaborate with an IP.

Jon Tower

Okay. Makes sense. Cool. All right. That's it for me for now. So I appreciate you taking the questions.

Benjamin Porten

Thanks, Jon. Happy New Year to you, too.

Hajime Uba

Thank you, Jon.

Operator

Brian Mullan, Piper Sandler.

Brian Mullan

Thank you. Just a question development in the prepared marks. You know, I think you spoke to continuing to move into smaller D MA S over time. I'm just wondering if you could speak to the targeted volumes of those stores, does the D MA dictate what the volume of a store can be or is it really just a function of the size of the box? And it really doesn't have to do with the location?

Benjamin Porten

So -- go ahead, Jimmy.

Hajime Uba

(spoken in Japanese)

Benjamin Porten

(interpreted) Brian, when we do site selection, our focus really is on cash on cash returns. We don't have a target AUD and so that remains unchanged in terms of how we approach smaller DNAs. We're focused on cash on cash returns. And our standards for the smaller DNAs are the same as all of our other DNAs.

Brian Mullan

Okay. Thank you. And then just to follow up. Just a clarification item, you gave the menu price for the quarter. Can you just let us know what traffic was? And I apologize if I missed it.

Benjamin Porten

Traffic --

Jeffrey Uttz

The traffic was down 2.3%, and price and mix was 4.1%.

Brian Mullan

Okay. Thank you very much.

Hajime Uba

Thank you.

Benjamin Porten

Thanks, Brian.

Operator

Sharon Zackfia, William Blair.

Sharon Zackfia

Hey. Thanks for taking the question, and Happy New Year.

Benjamin Porten

Happy New Year.

Sharon Zackfia

Thanks. It was really nice to see the improvement in mix and I know you touched on earlier, some of some of the drivers there. I guess I'm curious on your thoughts on the sustainability of mix becoming a more neutralized part of comps going forward.

Hajime Uba

(spoken in Japanese)

Benjamin Porten

(interpreted) Given that this is relatively recent without giving, too much forward expectations. We think the days of negative high single digit mix are behind us. We're, we're really pleased with the efforts that the marketing team has made typically when we have a two month campaign, you see deceleration the effectiveness in the second half. But we're continuing to see success in December with the most recent Weon campaign. And so without commenting about the long term sustainability of, the flattish mix that we have, we think that we're in a much, much better position than before and we've got all these levers that we never even considered to pull in the past. And so this is great, great progress.

Sharon Zackfia

Okay. Can you talk a little bit about -- sorry, go ahead.

Jeffrey Uttz

In addition to the great efforts by the marketing team, the other -- one of the other reasons why mix is improving it for the past year to year and a half. When we've taken menu price increases, we haven't touched the side menu items at all. So we're lapping the increase the menu price increases on side menus, which you know, when you take the menu price increase on things, it does impact mix to, to some extent and because we're lapping the price increase on side menu, I think that's also why mix is coming in line a little bit as well as the previously mentioned.

Sharon Zackfia

And then I'm sorry if you talked about this, my cell cut out and I had to redial back in, but on delivery, I know that's, more nascent part of your business. And I understand there's obviously some operational tension just given how busy the restaurants are. I mean, where, where are you on delivery at this point? Is it fully kind of turned on all of the time at all locations? How are you handling that? Is that proving to be incremental or bring in out of new people to the brand?

Benjamin Porten

Yeah, so I think it's definitely incremental. I think, as soon as somebody opens up their doordash shop, they're basically committed to eating inside. So that guest wouldn't have been coming into our restaurants anyway. And so any sale we do believe is incremental. I'd say in terms of where we are on that journey. It doordash has been live at all of our restaurants for almost a year now or yeah, almost a year. And it's, it is a pro is the, is the issue. We, we're constantly hitting ceilings just because our restaurants are so busy, which is a great problem to have. But we're always going to be prioritizing the guests that have got into trouble coming to our restaurants. And so as we infill markets and we're able to use the incremental restaurants as sort of pressure release valve for the kitchens. That's when we really see the off premise opportunity becoming more meaningful. But at this point, we're happy where it is especially given that it's incremental and we don't want to distract ourselves from the major opportunity, which is the tremendous white space of the United States.

Sharon Zackfia

Great. Thank you.

Benjamin Porten

Thanks, Sharon.

Hajime Uba

Thank you, Sharon.

Operator

Mark Smith, Lake Street Capital.

Mark Smith

Hi guys. First question for me is really on the cost side on corporate kind of G&A, really solid leverage during the quarter. You know, curious, if the guidance is maybe conservative as well as it kind of doesn't bake in any more additional leverage throughout the remainder of the year. But any insight you can give us on the guidance and if there's any costs coming in here later this year that maybe we should be watching for.

Jeffrey Uttz

No, there's no more, there's no more costs coming in and where the guidance is implies a 60-basis-point improvement year over year and I'm still comfortable with that number. I do believe that after having 80 bps two years ago and 90 bps last year in leverage that, that it's hard to keep that trend of 80 to 90 points a year. So I'm comfortable with the 60 bps. However, if sales trends do pick up and, and come in higher than where we expect them to be, then there additional leverage there. So when we get into April, I'm happy to give an update on that if we're at the point where we can, but I do want to get through a couple more months mark before. I increase the guidance on G&A because I still think that the 60-basis-point improvement for the year is pretty good.

Mark Smith

Absolutely. Other question for me is, is just around kind of preopening expenses you came in a little lower than we'd expected during the quarter. You know, was that a function of just kind of the timing of some of the openings earlier in the quarter or are you getting more efficiencies and lower cost kind of as we think about preopening expenses, maybe even in some of the smaller markets.

Hajime Uba

(spoken in Japanese)

Benjamin Porten

(interpreted) So there are two major things that worked in our favor in terms of pre opening. The first is last year we had nine units under construction versus the six units we had under construction during the same period this year. This, we have four managers for any new restaurant. And so you can, that's 12 managers across the three restaurant difference that we had in training. So that's an incremental labor costs that we incurred in fiscal '24 that we didn't have this year.
The other major change is the shift in our opening team structure. Now that we established the head largely across the country. We don't need the right now. We and a half or historically, we've had 2.5 opening teams. Now that we've established a geographic presence in enough markets, we've been able to pair back to 1.5 teams by reassigning the other members to become store managers at local restaurants and that has meaningfully reduced our training costs as well. And so that's helped with labor. It's also helped with our G&A.

Mark Smith

Excellent. Thank you.

Benjamin Porten

Thanks, Mark.

Hajime Uba

Thank you.

Operator

Jim Sanderson, Northcoast Research.

Jim Sanderson

Hey, thanks for the question. I wanted to follow on to some of the conversations about mix and the shift from mid single digit negative to flattish. Have you built similar promotions to drive items per check? Similar to I think what happened in the first quarter if I understood the benefit of the pair combo, is that the right way to think of it.

Hajime Uba

(spoken in Japanese)

Benjamin Porten

(interpreted) No, we were really pleased with The Perfect Pair campaign. It's the first time we've done something like that. And so I'd be very surprised if it was the last time we've done something, we'll do something like that. I think it's going to be a, a useful tool in our food focused marketing box. Jimmy, I'm sorry, what was the second part?

Hajime Uba

(spoken in Japanese)

Benjamin Porten

(interpreted) And the other part of mix is that we haven't taken pricing on side menu up to the last year. And the reason that's important in terms of mix headwinds is that there's less attachment on side menu items. And so you get less flow through on pricing that you take on side menu versus pricing that you take on plates. And so that was a mixed pressure now that we've lapped that that's less of a mix pressure.

Hajime Uba

(spoken in Japanese)

Benjamin Porten

(interpreted) Another thing that we're doing support mix is leading into our LTOs with some more premium items. We've seen that if we have the right LTOs, we can just increase attachment. It's not really a trade so much as just, a tech growth opportunity. And so that's another lever that we have for our mix.

Jim Sanderson

All right. Thank you for that. Just a follow-up question that. I think you had a promotion in the current quarter that is related to a contest for average check higher than $70. Is that the type of promotion that could help improve mix going forward? Is that the way to think of it?

Benjamin Porten

Absolutely. So this is the first time we've done like a holiday scratcher or any sort of scratch card, but this is not the first time that we've tied a marketing campaign to a spending threshold in the past when we've had it collaborations, we've had giveaways where you can get say like a T shirt or something. If you spend more than $70 and these sorts of efforts have have, yeah, you can really see the impact in check size and mix attachment.

Jim Sanderson

All right. Thank you for that quick question traffic trend. I think on a two-year stack basis, you saw a deceleration in traffic trend. Is that where we are today? Is that a good run rate? The low-single-digit positive traffic on a two year stack?

Jeffrey Uttz

Yeah. I mean, the thing -- the number I want you guys to focus on is the improvement from Q4, the minus 6.1% to minus 2.3% in this quarter. I think that's what's important because, we had some bumps in the road last year when we in July in summertime and we talked about that in some of our previous calls and where the number came out for this quarter at 1.8%. We're very happy with that. And quite H1stly, even though we don't give quarterly guidance, I don't have a problem telling you it's higher than I thought it would be for Q1. And I think it's higher than any of us thought it would be. So I'm, I'm happy with that number and, and I think it most important to look at it that way just of the summertime. So, like I said, some of the bumps in the road during the summertime and then also some of the weird things happening in November with the election. I think there's a lot of noise to look at it on a two year stack. So I'd rather focus on the quarter over quarter from Q4 to Q1 improve.

Jim Sanderson

All right. Last question for me. Could you just briefly review the shares outstanding to be used for the second quarter in fiscal '25 based on the follow on?

Jeffrey Uttz

Yeah, I have that number. Why don't we go to the net? I'll get you that, Jim. I don't have in front of me, but I'll get that.

Benjamin Porten

I believe it's 12,000 -- I'm sorry, 12 million shares.

Jim Sanderson

Yeah. Understood.

Jeffrey Uttz

I think now that it's probably 06 or something like that.

Jim Sanderson

Understood. Okay. Very good. Thank you. I get it.

Operator

George Kelly, Roth Capital Partners.

George Kelly

Hey, everybody. Thanks for taking the questions. First one. I think you mentioned in your prepared remarks that there's a new Mr. Fresh Dome launching in February. And I was just curious, kind of surprised to hear that. What, what's the opportunity there? Is it, maybe more kind of labor intensive than I would have thought or just what, what's the reasoning behind that, that launch?

Benjamin Porten

Do you remember the first time you went to a Kura Sushi? And you tried to open one of those Mr brushes? They're, they're not intuitive. You sort of need somebody to explain them because it's, you need to go under and lift it and pretty much if you go to one of our restaurants, you, I pretty much every time I go, I see somebody trying to pry it open like it's, they're like an otter with a clam and it's, it's just, it, it's confusing because most things aren't open like that.
And because it's not intuitive, our servers will spend 23 minutes explaining this. They'll even bring a Mres to the table so that guests can actually practice it to get accustomed to that. And so it's, it's not very guest friendly. It eats up our servers time and the newest refresh is just, it's a, it's a push button. It's, it works exactly as it, as you'd expect it to work and we're really excited. It's just, it's a lot friendlier. It can be intimidating to come into a restaurant and not know how to, order, not know how to take things off the belt. And this, you know, I think this just makes it a fun experience for everybody.

Hajime Uba

(spoken in Japanese)

Benjamin Porten

(interpreted) There are a lot of things that are unique to our restaurant, that need to be explained if you're coming for the first time, such as how our plate slos work, the fact that we pick up on where you can win prizes. And so for first time guests, you need to go through spiel and explain all of these different things. But in tandem with this fresh 2.0 we're actually we're releasing a new order, an update to the order panel software that on its landing page. We have a button asking for your first time guest and if you click that, it'll play a video that will basically teach you how to enjoy Kura. And so that meaningfully reduces server work as well. Having, having to do dozens of those during like a weekend peak hour is just, it's a meaningful drain on productivity. And so being able to streamline, this is something that we're really excited about.

George Kelly

Okay, excellent. That's helpful. Thank you. And then second question for me is or maybe a couple of questions on the reservation system. Most of the conversation in this call with respect to the reservation system has been about the opportunity for for cost savings but I'm curious if you could also discuss the opportunity to drive comp growth and what, what I'm unclear on, I guess is sort of how much you talked about it. And I think improving comp performance for a bunch of different reasons in the back half, is the reservation system? Is that a big factor in that sort of accelerating comp as well? And just how is it going to work? Are, are you going to open up a lot of inventory to the system or is it really just kind of shoulder periods or if you could just give more detail there too, that would, that would be helpful? Thank you.

Benjamin Porten

Yeah. So in terms of inventory, that's actually one of the most difficult parts of this project is figuring out the right number of tables to allocate for reservations. And that's actually we need to do that on a store by store basis. And so that's the operations team is hard at work on that in terms of the traffic opportunity. So, what Japan saw with its implementation is that the peak hours would fill up pretty much immediately. And people would realize that and rather than show up and wait for an hour and leave, they would make reservations for the shoulder periods, five o'clock, nine o'clock, 10 o'clock. And if they didn't want to do that, then they made reservations for the next day or the weekend. And so with our historical waitlist we've had about a 20% drop off where people will sign in and then not eat because the lines are too long. And so that 20% this is an opportunity to address that directly. I I'm by no means am I expecting a 20% traffic fall? But that is a massive opportunity for us. I'm really excited.

George Kelly

Okay, understood. Thank you.

Benjamin Porten

Thanks, George.

Hajime Uba

Thank you, George.

Operator

Todd Brooks, The Benchmark Company.

Todd Brooks

Hey, thanks and great start to the year. How about just a few tag in type of questions just following up on George's questioning there? How quickly does this turn on? Once you start the roll out of the reservation and self seating platform, then you said it, it's a store by store algorithm. But is this a start to turn on in Q2 and it takes a couple of months to turn the system on or is it a longer duration than that?

Benjamin Porten

So the goal that I'm holding myself to which is ambitious is a full system wide rollout by the end of the fiscal year. And so everything so far has moved on track. It's been remarkably smooth. We have our first in restaurant test next month. I'm extremely pleased with all of our partners. Everybody's really coming together to, to make sure that this goes on schedule. After we have, well, we'll probably test in the first restaurant for about a month or so and then begin to roll out. In earnest. My, my expectation would be.

Todd Brooks

Okay, great. And you spoke to Japan's experience in rolling it out and picking up shoulder reservations and four day reservations.
And you talked about the abandonment of the wait list here in the States. Can you talk to the experience in Japan from a traffic lift standpoint from having the system fully rolled out?

Hajime Uba

(spoken in Japanese)

Benjamin Porten

(interpreted) Given the current Japan is a separate publicly traded company, We can't speak to them in too much detail. Our understanding and what we've heard from them is that it did have a meaningful impact on traffic, but I, we're not able to quantify that right now. In terms of the sales lift, one thing that we're really excited about with the reservation system is that there is a guaranteed benefit in head count reduction as it is coupled with the self seating system. And it is a massive improvement to get satisfaction because we're introducing reservations for the first time. And our primary complaint is our wait times. And so this is a direct way to address that. And so we've got two things that we know for a fact are coming with this project. And so even if there isn't a sales list, there's still plenty of upside. We do expect the sales list, but in any case, we're we're still happy with this project.

Todd Brooks

That's great and, and the follow up different angle with the labor efficiency and you look at the initiatives around consolidating the stations down to three in the back of house. And you look at you look at upcoming self-seeding. If you look at what took to staff the restaurant two years ago versus what it should take to staff the restaurant post, the rollout of self-seeding, how much is that number dropped from a number of body standpoint.

Hajime Uba

(spoken in Japanese)

Benjamin Porten

(interpreted) Just to confirm, are you talking about historically or expectations going forward?

Todd Brooks

I'm just trying to get an idea of the efficiency if you pick, I'm pulling the numbers out from memory, but if it was 22 people per shift and with what we saved with the consolidation and say, are we going to 18 people per shift once we get to the end of these improvements?

Benjamin Porten

So if we're comparing like, say like pre-pandemic staffing, I'd say that the peak back of house and front of house has gone down by about two people each. And so it's been a pretty meaningful streamlining of the operations.

Hajime Uba

(spoken in Japanese)

Benjamin Porten

(interpreted) And then in terms of the operational streamlining that we discussed in the past call about the station consolidation, that opportunity really does come from the restaurants being busy. And so the upside is just going to grow and grow as the seasonality kicks in as we progress through the year.

Todd Brooks

Okay. And then the last one for me, you obviously have visibility into the IP partnerships for the back half. And I think we have two in Q1, we won't have one in Q2. How does the back half from a number of partnerships match up versus I think three last year? Is it 3 to 3 or are we stepping down a number of partnerships? But maybe making it up in the magnitude of, of who we're partnering with? Thank you.

Hajime Uba

(spoken in Japanese)

Benjamin Porten

(interpreted) So we have two lined up for the back half. They're very strong. We're really excited about them.

Todd Brooks

Okay, perfect. Thank you.

Operator

Thank you. There are no further questions at this time and this will conclude today's conference. You may disconnect your lines at this time and enjoy the rest of your day.

Portions of this transcript that are marked (interpreted) were spoken by an interpreter present on the live call. The interpreter was provided by the company sponsoring this event.