Earnings Call Transcript
KURA SUSHI USA, INC. (KRUS)
Earnings Call Transcript - KRUS Q4 2025
Operator, Operator
Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the Kura Sushi USA Fourth Quarter 2025 Earnings Call. Please note that this call is being recorded. On the call today, we have Hajime Jimmy Uba, President and Chief Executive Officer; Jeff Uttz, Chief Financial Officer; and Benjamin, Senior Vice President of Investor Relations and System Development. I would now like to turn the call over to Mr. Porten. Please go ahead.
Benjamin Porten, Senior Vice President, Investor Relations and System Development
Thank you, operator. Good afternoon, everyone, and thank you all for joining. By now, everyone should have access to our fiscal fourth quarter 2025 earnings release. It can be found at www.kurasushi.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 our 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 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 or as a substitute for results prepared in accordance with GAAP, and the reconciliations to comparable GAAP measures are available in our earnings release. With that out of the way, I would like to turn the call over to Jimmy.
Hajime Uba, President and Chief Executive Officer
Thank you, Ben, and thank you to everyone for joining us today. I'm incredibly proud of what our team achieved during fiscal 2025 as we delivered our strongest class of restaurant openings in recent memory, adding a record of 15 new locations. We also successfully managed our corporate G&A expenses, resulting in an annual adjusted EBITDA growth of over 30%. These accomplishments are particularly significant given the volatile consumer environment and the tariff pressures we navigated throughout the year, which have negatively impacted our top line results and restaurant-level margins. Nevertheless, our team remains resilient, and we continue to believe that our focus on execution has positioned us well for continued growth in fiscal 2026. Total sales for the fiscal fourth quarter was $79.4 million, representing comparable sales growth of 0.2%, led by traffic growth of 0.5% and partially offset by price and mix of negative 0.3%. Cost of goods sold as a percentage of sales was 28.4% as compared to the prior year quarter at 28.5%. I am exceptionally proud of our purchasing team who negotiate tirelessly to mitigate higher ingredient cost so we can continue to provide the best value possible for our guests. Labor as a percentage of sales improved by 30 basis points to 31.1% as compared to the prior year period of 31.4%, meeting the expectations for year-over-year improvement for labor in Q4 that we had shared in the previous earnings call. In spite of ongoing labor inflation, we have been able to offset these cost increases through aggressive operational initiatives and system implementations. I have some exciting news on this front that I will discuss shortly. Turning to real estate. We closed fiscal 2025 with 3 store openings in the fourth quarter, The Woodlands, Texas, Salt Lake City, Utah and Boulder, Colorado. Salt Lake City and Boulder are the first units in their respective markets. And as with every new market we've entered to date, they have performed very strongly. Subsequent to quarter end, we opened 3 units, Arcadia and Modesto in California and Freehold, New Jersey. With another 6 units under construction, the new fiscal year is off to a great start. We expect to open 5 to 6 units in the first half of the fiscal year and open the remaining units in the back half of the year. I'm excited to announce we are in the process of introducing status tiers to our rewards program. We are currently performing exploratory research to determine what kind of incentives resonate most strongly with our guests. This marks the first major update to our rewards program since we introduced Punchh. We are very excited to take our rewards program to the next level and look forward to keeping you updated on its progress. On system development, we have largely completed the revisions we have been working on for the reservation system. With these updates completed, we expect to begin marketing the reservation system to non-reward members beginning in the fiscal second quarter. As you may have guessed when I mentioned this earlier, I'm extremely pleased to announce that we have secured commercial use certification for our robotic dishwasher and are currently in the process of installing these machines in eligible restaurants. As a reminder, our initial expectation was that the robotic dishwasher opportunity would be largely limited to new openings with only 5 to 10 restaurants eligible for retrofitting, but now we expect to be able to retrofit approximately 50 restaurants of our existing 82. We expect to have the majority of the retrofit rollout during this fiscal year and to see labor improvements of approximately 50 basis points for restaurants that receive the retrofit. Fiscal 2025 was defined by the incredible cross-departmental efforts to do everything that we could to mitigate an unfriendly environment. Our commitment to growing corporate profitability remains unabated as demonstrated by the strides we made in adjusted EBITDA and adjusted net income. We have made great strides in honing our unit expansion strategies and have built a pipeline that allows us to capitalize on the opportunities represented by previously unexplored smaller DMAs. The efforts by the operations team and the implementation of new systems have created lasting efficiency gains. I am very grateful for all of our team members who generate the good news we get to share at each earnings call. I don't see that changing. Jeff, I'll hand it over to you to discuss our financial results and liquidity.
Jeff Uttz, Chief Financial Officer
Thanks, Jimmy. For the fourth quarter, total sales were $79.4 million as compared to $66 million in the prior year period. Comparable restaurant sales performance compared to the prior year period was positive 0.2% with traffic growth of 0.5% and price and mix of negative 0.3%. Comparable sales in our West Coast market were negative 0.6% and comparable sales in our Southwest market were positive 1.6%. Effective pricing for the quarter was 3.5%. On November 1, we took a 3.5% menu price increase. And after lapping prior year increases, our effective price for the first quarter will be 4.5%. Beginning in the first quarter of fiscal 2027, we will no longer be providing regional breakdowns for comparable sales as regional comps are largely determined by the timing of infills, and we don't believe that they are indicative of overall company trends. Turning now to our costs. Food and beverage costs as a percentage of sales were 28.4% compared to 28.5% in the prior year quarter. During the quarter, we began to see the impact of tariffs in our cost of goods sold of approximately 70 basis points. Labor and related costs as a percentage of sales were 31.1% as compared to 31.4% in the prior year quarter due to operational efficiencies and pricing, partially offset by wage inflation. Occupancy and related expenses as a percentage of sales were 7.1% compared to the prior year quarter's 7%. Depreciation and amortization expense as a percentage of sales was 4.7% as compared to the prior year quarter's 4.6%. Other costs as a percentage of sales were 15% compared to the prior year quarter's 14.4% due to sales deleverage and higher marketing costs. General and administrative expenses as a percentage of sales were 11.7% as compared to 20.3% in the prior year quarter due to the lapping of litigation costs incurred during the prior fiscal year, partially offset by higher compensation-related expenses. On a full year basis, general and administrative expenses as a percentage of sales were 13.3%, representing a 300 basis point improvement over the prior year's 16.4% G&A expenses as a percentage of sales, excluding litigation costs for the fourth quarter were 11.4% as compared to the prior year quarter's 13.2%. G&A expenses as a percentage of sales, excluding litigation costs for the full year were 12.5% as compared to the prior year's 14.1%. And we did not have any impairment charges in the fourth quarter of fiscal '25 as compared to 2.4% in the prior year quarter. Operating income was $1.5 million compared to an operating loss of $5.8 million in the prior year quarter, mainly due to the lower G&A and the impairment expenses just discussed. Income tax expense was $43,000 compared to $19,000 in the prior year quarter. Net income was $2.3 million or $0.18 per share compared to a net loss of $5.2 million or negative $0.46 per share in the prior year quarter. Adjusted net income was $2.5 million or $0.20 per share as compared to adjusted net income of $1 million or $0.09 per share in the prior year quarter. Restaurant-level operating profit as a percentage of sales was 19.8% compared to 20.9% in the prior year quarter. And adjusted EBITDA was $7.4 million as compared to $5.5 million in the prior year quarter. Turning to our cash and investments. At the end of the fiscal fourth quarter, we had $92 million in cash, cash equivalents and investments and no debt. And lastly, I'd like to provide the following guidance for fiscal year 2026. We expect total sales to be between $330 million and $334 million. We expect to open 16 new units, maintaining an annual unit growth rate above 20% with average net capital expenditures per unit continuing to approximate $2.5 million. We expect general and administrative expenses as a percentage of sales to be between 12% and 12.5%. And lastly, we expect full year restaurant-level operating profit margins to be approximately 18%. And with that, I'll turn it back over to Jimmy.
Hajime Uba, President and Chief Executive Officer
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.
Operator, Operator
First question comes from Jeremy Hamblin with Craig-Hallum.
Jeremy Hamblin, Analyst
Congrats on the strong profitability here. I wanted to just dive into what you saw over the course of the last several months. I think you were on the July call, very pleased with how quarter-to-date comp trends were. Maybe things softened a little bit in the August period. But I wanted to see if you could give us kind of a sense of where quarter-to-date trends were. And then you've had a bunch of IP collabs. And just to understand how effective those been? I know you've had kind of shorter periods than you previously had on the collabs, but some color on what you're seeing out there, especially in context that the number of restaurants have seen some softening in September and October.
Hajime Uba, President and Chief Executive Officer
Sure. Thank you, Jeremy, for your first question. Please allow me to speak in Japanese. Ben is going to translate.
Benjamin Porten, Senior Vice President, Investor Relations and System Development
So, Jeremy, this is Ben. Over the last several months, we've definitely experienced the same macro pressures that our peers have reported, and we are not exempt from them. We are very pleased with the marketing team's work; they have done an outstanding job. They are doing everything they can to drive comparable store sales, and the quarter would have been much more challenging without their efforts. Regarding the IP collaborations you mentioned, the quarter would have been worse without them. It's difficult to measure their impact numerically, but they certainly made a difference this quarter. The benefits from the reservation system, the light rice, and the 25th plates collectively contributed a bit, and that is what helped us achieve positive comparable store sales considering all these factors. While these efforts were largely countered by the macro pressures you referred to, we were happy to report positive comparable store sales for the quarter.
Hajime Uba, President and Chief Executive Officer
The situation would have been worse without them. It's challenging to evaluate the impact numerically, but they certainly influenced the quarter positively. The benefits from the reservation system, the light rice, and the 25th plates collectively contributed, which helped us achieve positive comparable sales when considering all those different factors. While those efforts were mostly counterbalanced by the macroeconomic pressures you mentioned, we were happy to report positive comps for the quarter.
Benjamin Porten, Senior Vice President, Investor Relations and System Development
And then in terms of quarter-to-date, we've seen the same operating environment as we've entered our first quarter.
Hajime Uba, President and Chief Executive Officer
That's what led us to positive comparisons despite various factors. While those efforts were mostly balanced out by the macro pressures you highlighted, we were happy to report positive comparisons for the quarter. Regarding the current quarter, we've encountered a similar operating environment as we began the first quarter.
Benjamin Porten, Senior Vice President, Investor Relations and System Development
And while this is not going to be a usual practice going forward, we felt that since we're already 2 months into the quarter, it makes sense to share our compensation expectations based on the results so far and our internal forecasts. Unfortunately, we expect Q1 to come in with negative mid-single digits. This does not indicate worsening performance or a deteriorating environment, but is simply a reflection of the year-over-year comparisons between Q4 and Q1. The difference is approximately 500 basis points between these two quarters.
Hajime Uba, President and Chief Executive Officer
We are already two months into the quarter, so it makes sense to share our compensation expectations based on the results so far and our internal projections. Unfortunately, we expect Q1 to show negative mid-single digits. This expectation does not indicate deteriorating performance or a worsening environment; rather, it reflects the quarter itself and the year-over-year comparisons between Q4 and Q1. The difference is approximately 500 basis points between these two quarters.
Benjamin Porten, Senior Vice President, Investor Relations and System Development
Just to remind you about the numbers we're comparing, Q4 had a negative 3% comparable sales, which makes for an easier comparison, while Q1 is up against a positive 2%. Given that we ended up about flat in Q4 while lapping that negative 3%, we expect a similar delta that would lead us to a mid-single-digit number for our Q1 comparable sales expectation.
Hajime Uba, President and Chief Executive Officer
Just to remind you of the numbers we're comparing, Q4 had a negative 3% comp, making it a relatively easy comparison, while Q1 is compared to a positive 2%. Since we finished about flat in Q4 despite that negative 3%, we expect the same difference, which should result in a mid-single-digit number for our Q1 comp expectation.
Benjamin Porten, Senior Vice President, Investor Relations and System Development
That being said, we aim to deliver positive same-store sales for the year. We believe we can achieve flat to slightly positive results. The first quarter will be the most challenging comparison. As we move into the second and third quarters, we will be comparing against a negative 5% and a negative 2% comp, respectively. During this time, we will also see the benefits of some of our stronger intellectual property collaborations, the pricing changes we implemented in November, and hopefully increased adoption of our reservation system as we begin to market it to non-rewards members.
Jeremy Hamblin, Analyst
Appreciate the color on that. And then just a follow-up here on the unit development and make sure I understood. So 16 new units for the year. I think you said 5 to 6 in the first half of fiscal '26 and 3 quarter-to-date. Do you anticipate opening up any more in Q1? And then just confirming that you're 5 to 6 in the first half of the year and then roughly 10 in the back half of the year?
Hajime Uba, President and Chief Executive Officer
I appreciate the clarification on that. To follow up on the unit development, I want to confirm my understanding. You mentioned 16 new units for the year, with 5 to 6 openings in the first half of fiscal '26 and 3 so far this quarter. Are you expecting to open any additional units in Q1? Just to clarify, you're projecting 5 to 6 in the first half of the year and approximately 10 in the second half?
Benjamin Porten, Senior Vice President, Investor Relations and System Development
Yes. We expect to open one more in the first quarter and then open one or two in the second quarter.
Hajime Uba, President and Chief Executive Officer
Yes. We're expecting to open one more in Q1, and then we would open one or two in Q2.
Benjamin Porten, Senior Vice President, Investor Relations and System Development
In the prepared remarks, we noted that six units were under construction, most of which have just begun construction. Therefore, while we have a significant number of units in progress, we anticipate that a total of five or six units will open in the first half of the year.
Operator, Operator
Next question, Mark Smith with Lake Street Capital Markets.
Alex Sturnieks, Analyst
Yes, Alex turning on the line for Mark Smith today. In the prepared remarks, you highlighted around 50 basis points of labor improvement from the robotic dishwasher rollout and you said you'd be retrofitting about 50 restaurants. How quickly do you expect that to be kind of implemented? And then when will we see the full impact on the P&L?
Hajime Uba, President and Chief Executive Officer
In the prepared remarks, you mentioned approximately 50 basis points of labor improvement from the robotic dishwasher rollout and indicated that you would be retrofitting about 50 restaurants. How soon do you anticipate that implementation will occur, and when can we expect to see the full impact on the profit and loss statement?
Benjamin Porten, Senior Vice President, Investor Relations and System Development
So regarding the robotic dishwashers, we placed our order with the manufacturer after receiving certification. They are currently in the process of developing and manufacturing them. Since it is a proprietary piece of equipment, we cannot obtain it off the shelf. Therefore, our main challenge is the production and shipping from Japan to the United States. We expect to begin significant implementation in the third quarter. While we anticipate retrofitting most eligible restaurants during fiscal '26, the impact on labor will be more significant in fiscal '27 compared to fiscal '26. The benefits we expect from the robotic dishwashers in fiscal '26 are included in the RLOPM guidance we shared earlier.
Hajime Uba, President and Chief Executive Officer
Our expectation is that the implementation will really start in Q3. While we anticipate that most eligible restaurants will be retrofitted during fiscal '26, the impact from a labor perspective will be much more pronounced in fiscal '27 than in fiscal '26. The expected benefits from the robotic dishwashers in fiscal '26 are reflected in the RLOPM guidance we shared earlier.
Benjamin Porten, Senior Vice President, Investor Relations and System Development
That being said, since Jimmy is as impatient as I am, he's going to Japan to visit the factory and talk with the President to request that they speed things up as much as possible. We hope to get these items delivered sooner than we currently expect.
Alex Sturnieks, Analyst
That's great. Great color there. Last one for me. You mentioned tariffs a little bit impacting you in the quarter. Given the ongoing back and forth for tariffs on Japan and Vietnam, can you give an update on supplier negotiations? What level of cost sharing you're seeing? Have you taken or do you anticipate taking any additional pricing to offset those costs?
Jeff Uttz, Chief Financial Officer
It's Jeff. We implemented a 3.5% increase in prices on November 1, following discussions with our suppliers. As mentioned earlier, we experienced about a 70 basis point impact in Q4. Moving forward, despite ongoing negotiations, they have progressed significantly compared to prior efforts. Currently, we anticipate our cost of goods sold for fiscal '26 to be around 30%. We wanted to share this insight for transparency regarding our expectations for COGS. This is also the reason we provided new guidance on restaurant-level operating profit margins this time, which is something we haven't done in the past. Given the current market volatility, we thought it would be helpful to communicate our outlook to the Street and everyone involved.
Operator, Operator
Next question, Jeff Bernstein with Barclays.
Pratik Patel, Analyst
Great. This is Pratik filling in for Jeff. I have a broader question regarding 2026. What strategic changes do you anticipate for the brand? We've heard a lot from restaurants about the challenges consumers are facing and their desire for value. What steps are you taking to address the current environment? Additionally, which new markets are you most excited about for 2026? I also have a follow-up.
Hajime Uba, President and Chief Executive Officer
This is Pratik on behalf of Jeff. I have a big picture question about 2026. What strategic changes do you anticipate for the brand? We have heard various comments from restaurants about the challenges consumers are facing and their quest for value. What steps are you taking to address the current situation? Additionally, which new markets are you most excited about for 2026? I also have a follow-up.
Benjamin Porten, Senior Vice President, Investor Relations and System Development
We are aware that consumers are currently very price sensitive and are more careful about their restaurant spending. Therefore, we have approached our November pricing with great care. We added a value question to our meal survey, which confirmed our belief that guests see us as offering unbeatable value. Additionally, we conducted a consumer insight study with regional focus to understand pricing elasticity in different markets. We believe our pricing strategy strikes a balance that is appropriate. Our efforts are not centered around one major initiative; instead, they consist of many small, diligent improvements across departments. This approach of cumulative incremental enhancements gives us a significant value advantage. We do not want to force a 20% margin in fiscal '26 at the expense of future traffic growth. Our goal is for our guests to continue recognizing us for our unbeatable value, and we aim to avoid being shortsighted regarding fiscal '26.
Hajime Uba, President and Chief Executive Officer
It's really the approach that we've always taken. It's just lots and lots of small incremental improvements, which cumulatively give us that massive value advantage. We didn't want to force a 20% margin in fiscal '26. We didn't want to trade the future potential traffic for one year of better margins. We really want our guests to continue to see us as providing an unbeatable value. And yes, we didn't want to be shortsighted as it relates to fiscal '26.
Benjamin Porten, Senior Vice President, Investor Relations and System Development
In terms of our current initiatives, we are focused on fundamental improvements for our restaurant business, specifically enhancing our products through menu development and sourcing. Our team has been incredible in their efforts, especially in improving our proteins consistently. We have several limited-time offers sourced from Japan that we believe will resonate well with our guests. We also recognize the significant potential of our IP campaigns and are pleased with our current pipeline, but we aim to leverage each campaign as a learning experience to fully capitalize on these opportunities. Additionally, we are working on introducing tiered statuses to our rewards program and plan to market our reservation system to non-rewards members. These initiatives are all part of our plans moving forward.
Pratik Patel, Analyst
And then my follow-up was for Jeff. It looks like the company ended fiscal '25 at exactly 12.5% of sales when it comes to G&A. And I know you mentioned in your prepared remarks that you expect fiscal '26 to be at 12% to 12.5%. So at the midpoint, you're assuming about 25 basis points of leverage. And I can certainly appreciate what's happening in today's environment. But that's just not as much leverage as we're used to seeing in the past? And I know, Jeff, longer term, I know you want to get the company to that sub-10% level. Just what's changed in fiscal '26? Is there just a deliberate strategy to allow for less leverage? Or is there another round of investment in certain areas? Just anything you can kind of help us unlock what's going on in G&A.
Jeff Uttz, Chief Financial Officer
Yes. Looking at it from an annual perspective, we achieved 160 basis points of leverage this year compared to last year, while I had anticipated it to be under 100 basis points. We managed to pull some savings from fiscal 2026 into fiscal 2025. Therefore, over a two-year period, even if we reach the midpoint, it translates to nearly 100 basis points of leverage each year. We can't break it down year by year precisely; we take savings whenever possible. Thankfully, we secured the savings earlier than expected. From a year-to-year viewpoint, since our results exceeded expectations, I was cautious about projecting for next year. I hope we can exceed our initial guidance at the start of the year. This is our starting guidance, and we will strive to raise it in one of our upcoming calls. For now, I believe a prudent estimate lies between 12% and 12.5%.
Operator, Operator
Next question, Andrew Charles with TD Cowen.
Zachary Ogden, Analyst
This is Zach Ogden on for Andrew. So it looks like new store productivity did improve from 2024 to 2025. Are you able to quantify what new store AUVs are relative to the system average of roughly $4 million? Or maybe if you could qualitatively speak to what's driving that improvement? And if it's 1 or 2 units driving that strong new store productivity, or if you're seeing more of a broad-based improvement?
Hajime Uba, President and Chief Executive Officer
This is Zach Ogden on for Andrew. It appears that new store productivity has increased from 2024 to 2025. Can you provide any specific figures regarding new store average unit volumes in comparison to the system average of approximately $4 million? Alternatively, could you discuss qualitatively what factors are contributing to this improvement? Is it primarily driven by one or two units, or are you observing a more widespread enhancement?
Benjamin Porten, Senior Vice President, Investor Relations and System Development
I want to start by clarifying that we don't have a target for Average Unit Volume. Our focus is on cash-on-cash return. That said, you are mostly correct. The decline in AUVs we reported today compared to last year was mainly due to new entrants in the AUV comparison base. However, the stores we opened in fiscal year '25 are exceptional and have been among the strongest classes we've seen in a while. This improvement isn't limited to just one or two units, and we are eager to see how they will impact the AUV comparison base, as we anticipate that number will increase with their inclusion.
Hajime Uba, President and Chief Executive Officer
The pressure on the average unit volumes we reported today compared to a year ago was mainly due to new entrants in the average unit volume comparison base. Additionally, the stores set to open in fiscal year 2025 are exceptional and represent one of the strongest groups we’ve seen in recent times. This isn't confined to just a couple of units, and we're really enthusiastic about their addition to the average unit volume comparison base. We anticipate that number will improve with their inclusion.
Benjamin Porten, Senior Vice President, Investor Relations and System Development
And regarding AUV, as I previously mentioned, it's not a target for us, and numerous factors can influence AUVs. For example, store size doesn't necessarily indicate performance. However, we wanted to confirm internally that our feelings about the strength of our performance are accurate, and they indeed are. The sales per square foot for fiscal '24 and '25 remain unchanged, which I believe is a more significant measure of our productivity.
Zachary Ogden, Analyst
Great. And then my follow-up question is, Jeff. The guidance for new store build costs stayed at $2.5 million, which is what it was in fiscal '25. So I mean, that's pretty encouraging considering you've previously talked about a $300,000 to $400,000 impact from tariffs. So is the impact from tariffs not as bad as you thought? Or are there just offsets to it?
Jeff Uttz, Chief Financial Officer
Let me be very clear, it's the same as it was in '25 and '24. So we've been in the same for a couple of years, which we're very proud of. That's a net number. The cost to build did go up a little bit because of tariffs, but we're now getting better TI allowances from our landlords. So when you offset the TI allowance against the higher build, it comes out to a net about $2.5 million. So our cash out of pocket remains the same.
Operator, Operator
Next question, Brian Mullan with Piper Sandler.
Allison Arfstrom, Analyst
This is Allison Arfstrom on for Brian Mullan. Just a quick one on the reservation system. It sounds like it's off to a strong start. At this point, are you able to quantify the impact? And if not, just anything new that you've learned with a few more months underway?
Benjamin Porten, Senior Vice President, Investor Relations and System Development
Yes, it's challenging to determine the impact of any single initiative, which has always been the case for us. The launch of the reservation system coincided with the resumption of our IP collaborations, so there’s a lot happening. We were pleased to see positive traffic, but our comparable numbers were fairly flat, indicating that the reservation system didn't significantly drive traffic. While it helped prevent the quarter from being weaker, it wasn't a major factor, which doesn't surprise us since we haven't really promoted it extensively. It primarily relies on organic discovery from our existing rewards members. I’m eager to see the results once we market it to a wider audience. From our experiences, we've identified several enhancements that will make it easier for both our staff and guests to use. This should lead to a reduction in front-of-house costs as we implement these improvements.
Operator, Operator
Next question, J.P. Wollam with ROTH Capital Partners.
John-Paul Wollam, Analyst
Maybe just 2 sort of focused around the guidance. But one, if I think about kind of the comp expectations that you guys just mentioned for the upcoming year, can you give us a sense of how much maybe the upgraded reward system and the broader marketing of reservation are baked into that expectation? Is there any risk that those underperforming would harm comp expectations? Or is that really just upside to what you guys have underwritten right now?
Hajime Uba, President and Chief Executive Officer
Maybe just focused around the guidance. But one, if I think about the comp expectations that you mentioned for the upcoming year, can you give us a sense of how much the upgraded reward system and the broader marketing of reservation are included in that expectation? Is there any risk that those underperforming would harm comp expectations? Or is that really just upside to what you have projected right now?
Benjamin Porten, Senior Vice President, Investor Relations and System Development
So regarding the revenue guidance, all the guidance we provided is not dependent on the IP campaigns or the reservation system. While those could offer additional opportunities for growth, we find it challenging to accurately measure the impact of new initiatives in advance. Therefore, we do not include those in our revenue projections to remain cautious.
Hajime Uba, President and Chief Executive Officer
In terms of the revenue guidance we provided, it is not dependent on the IP campaigns or the reservation system. These could offer additional opportunities for growth, but we understand that it is challenging to accurately measure the impact of new initiatives in advance. Therefore, we do not include these factors in our revenue projections to remain cautious.
Benjamin Porten, Senior Vice President, Investor Relations and System Development
And regarding our guidance, you might have been surprised by our revenue range along with our expectation of achieving flat or slightly positive comparisons for the entire year. This mainly reflects the initial performance. We briefly mentioned this in the prepared remarks, and that serves as the connection. I apologize...
Hajime Uba, President and Chief Executive Officer
And on the note of guidance, we think maybe you might have raised an eyebrow when you saw our revenue range combined with our commentary that we expect to be able to hit flat or slightly positive comps for the full year. This is really a reflection of the opening cadence. We touched on this a little bit in the prepared remarks, but that is really the bridge there. I'm sorry...
Benjamin Porten, Senior Vice President, Investor Relations and System Development
It's typically recommended to use a midyear convention for revenue at 50%, but we would suggest 40% or even lower, considering the pace of openings.
John-Paul Wollam, Analyst
Great. And then just switching over to kind of the 4-wall guide. Just kind of curious, obviously, the environment hasn't gotten any better since July. But just curious if you could just give us a sense of what's changed since we talked in July when it sounded like maybe there was some optimism about really ramping back towards that 20%.
Hajime Uba, President and Chief Executive Officer
You're going to use a midyear convention for revenue at 50%, we would recommend 40% or even less, just looking at the cadence of openings. Great. And then just switching over to the 4-wall guide. I'm curious about what's changed since we talked in July when it seemed like there was some optimism about ramping back towards that 20%.
Benjamin Porten, Senior Vice President, Investor Relations and System Development
With the 20%, you're referring to the RLOPM?
John-Paul Wollam, Analyst
Yes, the restaurant level.
Hajime Uba, President and Chief Executive Officer
The environment hasn't improved since July. I'm curious if you could provide insights on what has changed since our last discussion in July when there seemed to be some optimism about approaching that 20%.
Benjamin Porten, Senior Vice President, Investor Relations and System Development
So JP, to answer your question first, the major difference between when we last met in July and the discussion today is the changed expectations for our cost of goods sold. As Jeff mentioned earlier, the impact of tariffs in the fourth quarter was 70 basis points. For the full year, that impact was not significant, with a rate of 18.4%. However, looking ahead to this year, we will experience the full impact in all quarters instead of just the fourth. We know that we increased prices and will benefit from that, but typically we only achieve about half of the flow-through. Additionally, we have seen significantly elevated utility costs and tariffs affecting non-cost of goods sold items. Considering all these factors and pressures, we believe that 18% is the appropriate expectation for fiscal '26.
Hajime Uba, President and Chief Executive Officer
We had 18.4%, but looking to this year, we will experience the full impact throughout all quarters instead of just Q4. We realize that we increased prices, and we will benefit from that, but typically you only see about half of the flow-through. Additionally, we've noticed significantly higher utility costs and tariffs affecting non-COGS items. Considering these pressures, we believe that 18% is the appropriate expectation for fiscal '26.
Benjamin Porten, Senior Vice President, Investor Relations and System Development
That being said, our overall goal for fiscal '26 remains at 20%, and we aim to get back to that as soon as possible. It's important to note that with COGS at 28.6% this year and an expectation of 30% next year, that's a difference of 140 basis points. However, our guidance for restaurant-level operating profit margin is only 40 basis points lower than this year's performance. So we're...
Hajime Uba, President and Chief Executive Officer
That being said, emphasis for fiscal '26, 20% remains the overall goal, and we hope to get back to that as soon as possible. Also, keep in mind that with COGS of 28.6% this year and an expectation of 30% next year, that's 140 basis points. However, our restaurant-level operating profit margin guidance is only 40 basis points lower than what we ran this year. So we're...
Benjamin Porten, Senior Vice President, Investor Relations and System Development
We are able to control the rest of the profit and loss.
Operator, Operator
Next question, Tania Anderson with William Blair.
Tania Anderson, Analyst
Most of my questions have been answered. However, I would like to follow up on your observations regarding the reservation system and any potential improvements. Could you provide more detail on that? Additionally, regarding the IP collaboration, as you build out your portfolio with a combination of established and possibly new, more experimental collaborations, how much control do you have over the timing and flow of these collaborations throughout the year? I'm curious about that.
Benjamin Porten, Senior Vice President, Investor Relations and System Development
In terms of the collaboration timing, we are largely dependent on the licensors. They generally have their own marketing schedules, which usually aligns with our interests since they seek to partner with us when they are promoting something. However, we do not have control over the timing. Regarding the reservation system, there are some anticipated improvements. The main enhancement would be allowing guests to access their own reservation information. Currently, they receive this information via text, which can be difficult to locate if the reservation was made some time ago, causing frustration for both guests and servers. I experienced this firsthand while testing the program, and it was quite challenging. This is a significant factor when considering labor savings for front-of-house operations. Additionally, we're modifying how servers view party information. Though it may not seem impactful from an operational standpoint, the previous setup hindered our ability to gather accurate data. The upcoming changes will enable us to collect precise data for the first time, allowing us to make informed adjustments and decisions based on that information. While it may not be particularly flashy, this will greatly enhance our planning for the reservation system.
Operator, Operator
Next question, Todd Brooks with Benchmark StoneX.
Todd Brooks, Analyst
Jeff, can we discuss that you mentioned the mix was down 30 basis points last quarter? Clearly, the consumer weakened throughout the quarter. Did the mix also weaken in terms of side menu attachment or beverage attachment? And within the mid-single-digit comp expectation for Q1, is there a larger impact on price/mix compared to what we experienced in fiscal 4Q?
Hajime Uba, President and Chief Executive Officer
Jeff, can we talk about the mix being down 30 basis points last quarter? Clearly, the consumer panel weakened over the course of the quarter. Did the mix also weaken in terms of side menu or beverage attachments? Given the mid-single-digit comp expectation for Q1, is there a more significant impact on price/mix compared to what we observed in fiscal 4Q?
Benjamin Porten, Senior Vice President, Investor Relations and System Development
Todd, are you asking about the differences we're observing between Q4 and Q1, or is this a more general inquiry about mix?
Todd Brooks, Analyst
I was just trying to tie it to what people are seeing with the consumer. Did mix slow during the course of Q4 to end up at down 30 basis points, but the consumer maybe tighten their wallets a little bit more and didn't attach the same way as the quarter went on? And what's the price/mix assumption within the down mid-single-digit guidance for the first quarter same-store sales?
Hajime Uba, President and Chief Executive Officer
I was trying to connect it to consumer behavior. Did the mix decline during Q4, ending up down 30 basis points, as consumers perhaps became more cautious and didn't engage in the same way as the quarter progressed? Also, what is the price/mix assumption included in the mid-single-digit decline guidance for the first quarter same-store sales?
Benjamin Porten, Senior Vice President, Investor Relations and System Development
We have certainly observed check management. In Q4, we implemented several initiatives aimed at improving our mix, such as introducing lighter rice, the 25th plate, and experimenting with spending thresholds linked to giveaways. However, given the current environment and the fact that consumers are not as confident as they were six months ago, the timing for these efforts to improve mix isn't optimal. Therefore, our primary focus is on increasing traffic. This has been our strategy during past economic downturns. We understand that consumers will be more cautious with their spending. Our goal is to encourage them to visit us, and we are placing significant emphasis on menu development. As mentioned earlier, we want to attract customers with exciting new items that encourage repeat visits because they enjoy them. We are looking forward to seeing the results of these efforts beginning in Q3.
Todd Brooks, Analyst
Okay. Great. Second question, I don't know if you guys have ever talked about your customer profile. But if you looked at performance across the quarter, did you see any big disparities by income cohort or age cohort or geographically that would be instructive to share with us?
Hajime Uba, President and Chief Executive Officer
We anticipate beginning to see the outcomes of those efforts starting in Q3. Todd Brooks, Analyst, asked if the company has previously discussed its customer profile, specifically inquiring about any significant differences in performance during the quarter based on income, age, or geographical factors that could be useful to share.
Benjamin Porten, Senior Vice President, Investor Relations and System Development
There have not been any significant changes in demographic patterns or behavior that we have observed, so there is nothing notable to mention.
Hajime Uba, President and Chief Executive Officer
There have really been no meaningful changes in demographic patterns or behavior that we've seen. And so nothing to call out.
Benjamin Porten, Senior Vice President, Investor Relations and System Development
We are noticing a lot of reports indicating that the Gen Z consumer is weaker, and many of our top-performing restaurants depend on traffic from universities and colleges. Therefore, we are closely monitoring those locations.
Hajime Uba, President and Chief Executive Officer
There have really been no meaningful changes in demographic patterns or behavior that we've seen. So there is nothing significant to mention. However, we are noticing many reports about a weaker Gen Z consumer, and some of our top-performing restaurants depend on university or college traffic. Therefore, we are closely monitoring those locations.
Benjamin Porten, Senior Vice President, Investor Relations and System Development
But we're not seeing anything that would cause concern for us at this point.
Todd Brooks, Analyst
Great. Ben, I’ll give you a chance to discuss the commercial. I know it will provide us with a forward look and a preview of some upcoming IP partnerships that you might want to share. I wasn't sure if there was anything else you wanted to highlight besides Kirby, regarding the next two or three partnerships.
Benjamin Porten, Senior Vice President, Investor Relations and System Development
Yes. The next one that we have is Sanrio. We're working with a couple of characters from that Sanrio universe that we've deliberately chosen. I won't spoil it for the marketing team. I'll let them unwrap that present. But I'm really excited about that, not just because I think those characters are probably the strongest properties, we could pick among the Sanrio stable, but also this is going to be a shorter period, a 1-month campaign instead of a 2-month campaign. And so it's another opportunity for us to explore how these differences can affect the response that we see from our guests.
Hajime Uba, President and Chief Executive Officer
I'm really excited about the Sanrio universe we've chosen for our campaign. I won't reveal too much since I want to leave that for the marketing team. I believe those characters are some of the strongest we could have selected, and this time we're running a shorter 1-month campaign instead of the usual 2 months. This gives us another chance to see how these variations can influence our guests' responses.
Benjamin Porten, Senior Vice President, Investor Relations and System Development
Kirby is the next one. We entered the year with Demon Slayer, and now we are moving on to One Piece, followed by Kirby in December and January, and then February will feature Sanrio.
Operator, Operator
Thank you. This concludes today's teleconference. You may disconnect your lines at this time, and thank you for your participation.