Krispy Kreme has recently adjusted its full-year earnings guidance following the strategic sale of a majority interest in Insomnia Cookies, while simultaneously reporting second-quarter revenues that surpassed Wall Street expectations, leading to a considerable uplift in its stock price. The renowned donut retail chain has now forecasted its adjusted earnings for 2024 to fall between $0.24 and $0.28 per share, a downward revision from the previous anticipated range of $0.27 to $0.31.
Furthermore, the company’s projections indicate an organic revenue growth between 5% and 7%, contrasting with the earlier estimated growth of 6% to 8%. Krispy Kreme's anticipated net revenue for the year is set between $1.65 billion and $1.69 billion. Analysts surveyed by Capital IQ are predicting a normalized earnings per share (EPS) of $0.27 based on revenue estimates of $1.78 billion.
Last month, Krispy Kreme finalized a significant transaction involving the sale of a majority stake in Insomnia Cookies to Verlinvest and Mistral Equity Partners, a move that represents a total enterprise value of $350 million. The donut chain reported that it received approximately $127.4 million from the deal following the quarter and an additional $45 million attributed to the refinancing of intercompany debt.
In the most recent quarter ending June 30, 2023, Krispy Kreme witnessed a 7.3% increase in net revenue year-over-year, totaling $438.8 million, exceeding the market’s expectation of $434 million. The organic revenue rose by 7.8%, benefitting from a remarkable 23% increase in global points of access and a significant 22% increase in digital sales.
In the U.S., net revenue surged by 8.2%, while its international revenue improved by 3.9%. On Thursday, shares of Krispy Kreme soared by 14% during afternoon trading sessions, reflecting investor confidence in the company’s growth strategies. "In the U.S., our profitable nationwide expansion is accelerating as we grow with existing customers and establish new national partnerships," stated Chief Executive Josh Charlesworth in an official communication.
One of the notable expansions involves a noteworthy agreement with McDonald's, set to commence this fall across the Midwest, starting in Chicago. Back in March, Krispy Kreme entered into a partnership to supply its iconic doughnuts to McDonald's locations nationwide as part of a broader agreement with the fast-food titan.
This expansion into Chicago marks a pivotal moment for the partnership, with Truist Securities highlighting the unexpected growth opportunity in a Thursday note to clients. The analysts, including Bill Chappell, believe this collaboration with McDonald's will pave the way for Krispy Kreme to expand its reach with additional national retailers in the months ahead.
Overall, Truist characterized Krispy Kreme’s performance in the quarter as “solid.” Additionally, the company’s second-quarter adjusted EPS remained stable at $0.05, aligning with market expectations, although it did decrease from $0.07 recorded in the same quarter last year. This decline is largely attributed to increased depreciation and amortization costs linked to Krispy Kreme’s strategy of enhancing the availability of fresh doughnuts and facilitating the ongoing growth of Insomnia Cookies.
Current Stock Price: 10.49, Change: +1.29, Percent Change: +13.97.