Key Points
Investors found the company’s latest earnings report to be quite the stale donut.
It missed significantly on the bottom line, although it exceeded the average analyst estimate for revenue.
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Few market players were finding the taste of Krispy Kreme (NASDAQ: DNUT) stock appealing on Thursday. They traded out of the donut purveyor assertively, to the point where its shares lost 7% of their value that day. This was notably worse than the S&P 500 index’s performance, as the benchmark index closed down only marginally.
A hole in the donut
That morning, Krispy Kreme published a second-quarter earnings release that also heralded the launch of a turnaround plan.
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As for the quarter’s figures, the company’s revenue was just under $380 million, which was down considerably from the almost $439 million in the same period of 2024. Krispy Kreme wasn’t profitable on a non-GAAP (adjusted) basis, with net loss flipping to a loss of $25 million, or $0.15 per share, from a profit of just over $9 million in the year-ago quarter.
Analysts were modeling a far narrower net loss of only $0.04, although the company beat their collective expectation of a revenue figure of less than $379 million.
Krispy Kreme said its performance was particularly affected by its now-dissolved partnership with fast food titan McDonald’s. It quoted CEO Josh Charlesworth as saying this arrangement produced “unsustainable operating costs” for the donut maker.
Turnaround time
Krispy Kreme hopes to right the ship with that turnaround plan, which it sketched out within the earnings release.
The company said this effort would focus on four aspects of its business: refranchising, particularly in foreign markets, reducing capex through better utilization of existing assets, widening its profit margins, which should be achieved through efficiency measures such as the outsourcing of U.S. logistics, and aiming for sustainable and profitable growth.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
