GEN Restaurant Gr (NASDAQ:GENK) held its first-quarter earnings conference call on Thursday. Below is the complete transcript from the call.
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View the webcast at https://edge.media-server.com/mmc/p/o7shj23x/
Summary
GEN Restaurant Gr reported an 8.8% decrease in same-store sales for Q1 2026, primarily due to economic challenges and high gas prices in California.
The company is undergoing strategic initiatives, including a partnership with Chubby Cattle for five restaurants and streamlining menu options to manage food costs.
GEN Restaurant Gr is expanding its consumer packaged goods (CPG) division, projecting a run rate of over 2,000 supermarket locations by 2027, with potential revenue exceeding $100 million annually in three years.
Operational highlights include the launch of a digital platform, acceptance of cryptocurrency payments, and development of a Gen loyalty program.
Management expressed cautious optimism for future growth, balancing restaurant operations with CPG expansion, while slowing new restaurant openings to five to seven in 2026.
Full Transcript
OPERATOR
Good afternoon ladies and gentlemen and welcome to GEN Restaurant Group Inc. Q1 2026 earnings call. this time, all lines are in listen only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, May 14, 2026. And now I would like to turn the conference over to Tom Kroll, the company’s Chief Financial Officer. You may begin.
Tom Kroll (Chief Financial Officer)
Thank you operator and good afternoon. By now everyone should have access to our first quarter 2026 earnings release. If not, it can be found at www.genkoreanbbq.com in the Investor Relations section. Before we begin our formal remarks, I need to remind everyone that our discussions today will include forward looking statements within the meaning of federal security laws, including but not limited to statements regarding growth plans and potential new store openings, as well as those types of statements identified in our annual report on Form 10-K for the year ended December 31, 2025 and our subsequent reports filed with the SEC. These forward looking statements are not guarantees of future performance and therefore you should not put undue reliance on them. These statements represent our views only as of the date of this call and are also subject to numerous risks and uncertainties could cause actual results to differ materially from what we currently expect. We refer you to our recent SEC filings, including our Annual report on Form 10-K and quarterly reports on Form 10-Q, for more detailed discussions of the risks that could impact our future operating results and financial condition. Except as required by law, we undertake no obligation to update or revise these forward looking statements in light of new information or future events. During today’s call, we will discuss some 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 reconciliations of the non GAAP financial measures to the most directly comparable GAAP financial measures are available in our earnings press release and our SEC filings which are available in the Investor Relations section of our website. Now I’d like to turn it over to our Chairman and CEO David Kim.
David Kim (Chairman and CEO)
Thank you Tom and good afternoon everyone. In the first quarter of 2026, the economic challenges continued to impact customer traffic for all restaurant businesses just as we began seeing improvement in January. The increase in fuel prices because of the war has reduced customer discretionary spending. This impact has been particularly pronounced for GEN as approximately 45% of our stores in the US are in California where gas prices have climbed to over $6 a gallon. This has led to a decrease in our same store sales of approximately 8.8% for the quarter, although our same store sales Decline improved from 11.7% in the fourth quarter of 2025. In our continued response to the changing economic environment, several directional changes were made at the end of 2025 and in the first quarter of 2026 through initiatives designed to improve the company’s value proposition. First, during March of 2026, as part of an ongoing portfolio update, we entered into a partnership with Chubby Cattle International related to five of our restaurants. We will own 49% and Chubby Cattle will own 51% of these restaurants which will be operated under the Chubby Cattle brand. Importantly, these joint ventures are far different than closing a restaurant as the locations remain open and continue generating value. The first two conversions took place on May 1, 2026, with two more scheduled for June 1, 2026 and the final conversion on August 1, 2026. This transaction created a 4.5 million write down, but we anticipate no further liability from the deal and expect these five restaurants to generate strong EBITDA going forward, of which we’re entitled to 49%, enhancing our overall profitability. This will reduce our loss positions in these 5 restaurants starting in the second and third quarters of 2026. Second, we also have several operational initiatives currently in progress to improve the financial result of our restaurants. A. We’re adjusting our menu to streamline options in response to stubborn increases in our food cost. B We’re enhancing our incentive program with restaurant managers to drive stronger store level execution and performance. C We’re testing new boba drinks as well as soju drinks which have shown promising sales during the Launch. D Following 2/4 of research and preparation, we are exploring a new digital platform to enhance our customers online experience. In parallel, we plan to roll out our GEN loyalty program in quarter two and have begun accepting cryptocurrency for pay. We’re also preparing to launch our enhanced e commerce website which will offer an expanded selection of our Gen branded products. Finally, we have made the strategic decision to slow restaurant developments to five to seven openings for the full year of 2026 and have proactively suspended construction on six additional stores. This disciplined capital allocation strengthens our balance sheet and reduces near term expenses. We have also initiated an AI program to drive further efficiencies and reduce corporate overhead. As a further update, our Costco gift card program continues to contribute to our brand presence with cumulative sales since inception reaching over $30 million. In October 2025, we announced the creation of a new division within the company to develop and sell CPG products to grocery stores. We started by testing our products at over 30 locations in Southern California in October of 2025 and the customer response significantly exceeded our expectations. We’re now confident in an estimated run rate of over 2000 locations in supermarkets across the country. We plan to announce a financial forecast for the CPG division at the end of quarter two. Our retail product lineup under the Exclusive Gen brand. It is anchored by our core meat offerings complemented by a growing selection of additional products spanning from beef jerky and beef chips, frozen sides, snack chips, sauces and seasonings, ready to drink beverages and soju’s sold under our Jeju brand. Here are a breakdown of our 56 SKUs Core frozen meats 6 SKUs Beef jerkies 6 SKUs Frozen meat and sides 12 Skews Snack chips 6 SKUs Sauces and seasonings 6 Skus Ready to drink beverages 9 Skus soju’s 11 Skus Part of the expansion of our ecosystem is our CPG placement including soju with the number one beverage retailer, the west coast bevmo. Our growing lineup of shelf stable Korean snacks and beverages, as previously mentioned, represents a meaningful expansion of our non meat product catalog. These single serve formats are well suited for convenient driven channels such as 7, 11 and other convenience stores, opening a significant growth opportunity beyond our core meat offerings. Additionally, at the end of May, Albertsons is launching a regional test of our full shelf stable product lineups across 150 stores and based on the projected numbers, we anticipate additional regions to follow. With the strength of our restaurant labor force, JEN has deployed trained team members to local grocery stores to demo our products which have been highly successful in driving sell throughs. Unlike many grocery demos which are run by outside companies with no product knowledge, our restaurant staff brings firsthand expertise that creates a dynamic sales presentation and significantly lifts product sales. Combined with our well known JEN brand and great tasting Korean inspired food, this makes it easy for our staff to introduce our products to new customers. Additionally, last week we announced the launch of our Costco Roadshow Demonstration series, a multi region initiative bringing JEN Signature Ready to Cook marinated meats to Costco members in Oregon, Washington, Alaska and Texas. Powered by our restaurant staff, this launch marks the next chapter in Jen’s growing retail presence and supports our broader phased retail expansion strategy. We anticipate this will lead to permanent shelf space. Separately, we recently announced a major milestone in Jen’s retail expansion Our first direct Southern California and Hawaii regional Costco purchase order securing freezer aisle placement for one SKU of our ready to cook marinated meat across approximately 40 Costco warehouse locations. Importantly, this order was issued without a preceding regional roadshow requirement, reflecting Jen’s strong regional brand presence, proven …
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