GEN Restaurant Group, Inc. Class A ((GENK)) has held its Q2 earnings call. Read on for the main highlights of the call.
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In the latest earnings call, GEN Restaurant Group, Inc. Class A presented a mixed sentiment, reflecting strong expansion and product development strategies. However, the company is grappling with challenges such as declining same-store sales and increased operational costs. While international growth and efficient cost management are promising, these are counterbalanced by a net loss and external economic pressures.
International Expansion
GEN Restaurant Group marked a significant milestone by opening its first international restaurant in a suburb of Seoul, South Korea. This move signals the company’s ambition to expand its footprint beyond domestic borders. Plans are already in place to open more locations in South Korea by the third quarter of 2025, highlighting a strategic focus on international growth.
Strong Average Unit Volume (AUV)
The company reported an impressive AUV revenue of $5.3 million per restaurant. This strong performance underscores GEN’s robust position in the casual dining sector, indicating that individual units are performing well despite broader market challenges.
Efficient Payback Period
GEN is on track to achieve a 2.3-year payback period for its new stores in 2024, which is shorter than most competitors. This efficiency allows for expansion with limited debt, positioning the company favorably for future growth.
Successful Product Expansion
The introduction of GEN Korean Barbeque products, including meats and sauces, into wholesale channels like Costco and Sam’s Club, marks a successful product expansion. This move diversifies revenue streams and enhances brand visibility.
Increase in Total Revenue
Total revenue for the second quarter of 2025 increased by 2.2% year-over-year to $55 million. This growth, albeit modest, demonstrates resilience in a challenging economic environment.
Same-Store Sales Decline
The company experienced a sharp downturn in same-store sales, attributed to global tariffs and local immigration policies affecting customer traffic. This decline poses a significant challenge, particularly in regions with a large Hispanic customer base.
Net Loss Before Income Taxes
GEN reported a net loss before income taxes of $1.8 million, a stark contrast to the net income of $2.1 million in the previous year. This shift highlights the financial pressures the company is currently facing.
Increased Costs
The cost of goods sold rose by 97 basis points to 33.8%, driven by inflationary pressures and the costs associated with new restaurant operations. This increase underscores the challenges of managing operational costs in the current economic climate.
Lower Adjusted EBITDA
Adjusted EBITDA decreased to $1.9 million from $4.9 million in the second quarter of 2024. This decline reflects the financial strain on the company’s profitability amidst rising costs and declining sales.
Slow Start in South Korea
The new South Korea location experienced a slow start in sales, though there are signs of gradual improvement. This slow uptake highlights the challenges of entering a new market, but the company remains optimistic about future growth.
Forward-Looking Guidance
Looking ahead, GEN Restaurant Group is navigating a challenging macroeconomic environment with strategic expansions and innovations. The company opened seven new restaurants in the first half of 2025, including its first international location, and plans to exceed its target of 12 to 13 new stores by year-end. Despite facing challenges like global tariffs and immigration policies, GEN maintains a strong cash flow and is implementing AI and new technologies to improve labor efficiencies. The company remains optimistic about its long-term growth potential, aiming to maintain a 17% to 18% margin.
In conclusion, GEN Restaurant Group, Inc. Class A is navigating a complex landscape with a mix of promising strategies and significant challenges. The earnings call highlighted the company’s strong international expansion and product development efforts, yet also underscored the financial pressures from declining same-store sales and increased costs. Despite these hurdles, GEN’s forward-looking guidance reflects optimism and a commitment to strategic growth.