Kappa Sushi reports heavy losses in FY 2023 as high costs drag on profits

A Kappa Sushi restaurant in Japan.

Kappa Create, the Yokohama, Japan-based parent company of the Kappa Sushi conveyor-belt sushi chain, issued a notice to investors this summer that its actual results for fiscal year 2023 would fall below its forecast issued on 8 February – an estimate which had already sharply lowered expectations from the company’s initial 8 November forecast.

In the same July notice, Kappa advised investors it would record an impairment loss due to the drop in performance.

Kappa Sushi – Japan’s fourth-largest sushi chain by sales following Sushiro, Kura Sushi, and Hama-sushi – issued several press releases in early July, notifying investors of the many issues that led to the dip in results.

Throughout fiscal year 2023, the company gradually eased restrictions that it implemented to prevent the spread of Covid-19. As a result, sales initially increased compared to the previous fiscal year, but increased sales were offset by soaring prices for raw materials and energy, which raised logistical costs and negatively affected profits.

In its initial forecast revision in February, the company said that the eighth wave of Covid-19 occurred in Japan during the third-quarter consolidated accounting period. Due to the significant decrease in the number of people dining out and, therefore, demand during the year-end holidays, the company advised that net sales were likely to fall below the previously announced November forecast.

Additionally, the company had begun investing in store renovation, but the war between Russia and Ukraine, and the depreciation of the yen, resulted in sharp increases in raw material costs. In order to secure staff for stores, the company also had to pay higher hourly wages.

In Kappa’s second forecast revision, issued this summer, the company said because profits and ordinary income exceeded the previous fiscal year, it could not receive subsidy income from the government – such as a cooperation grant for eateries that comply with operating hour restrictions during the pandemic – that it received in the previous fiscal year. The government subsidies require a business to show a drop in sales to qualify.

Kappa Create’s sales for the fiscal year ending 31 March were 5.4 percent higher than in the previous year, totaling ... 

Photo courtesy of Takashi Images/Shutterstock

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