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Krispy Kreme Doughnuts Inc. Reports Operating Results (10-Q)

December 11, 2012 | About:
10qk

10qk

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Krispy Kreme Doughnuts Inc. (KKD) filed Quarterly Report for the period ended 2012-10-28.

Krispy Kreme Doughnuts, Inc. has a market cap of $591.5 million; its shares were traded at around $9.02 with a P/E ratio of 4.1 and P/S ratio of 1.6. Krispy Kreme Doughnuts, Inc. had an annual average earning growth of 7.5% over the past 5 years.

Highlight of Business Operations:

Sales to grocers and mass merchants increased 3.9% to $22.6 million, with a 6.9% increase in average weekly sales per door partially offset by a 2.9% decline in the average number of doors served. The Company believes that average weekly sales per door in the grocery/mass merchant channel have grown as a result of, among other things, improved customer service, introduction of additional price points, and the addition of new relatively higher volume doors. The decline in the average number of doors served in the grocery/mass merchant channel reflects store closures by a regional grocery store customer as well as the elimination of loose doughnut sales at another regional grocer, although the Company continues to sell packaged products to this customer. Sales of loose unpackaged products comprised approximately 2% of sales to grocery/mass merchant customers for the three months ended October 28, 2012, with the balance comprised of packaged products.

On-premises sales increased 10.0% to $102.5 million in the first nine months of fiscal 2013 from $93.2 million in the first nine months of fiscal 2012, driven principally by higher customer traffic. The Company is developing and implementing new and enhanced marketing programs designed to increase guest visit frequency. In addition to improved marketing programs, management believes that customer traffic has been positively affected by ongoing store remodelings, an emphasis on hospitality, and continued use of creative limited time doughnut offerings. Additionally, approximately 0.9 percentage points of the sales increase reflects retail price increases implemented in the first quarter of fiscal 2012. On March 7, 2011, the Company implemented price increases at substantially all its stores designed to help offset the rising costs of doughnut mixes, other ingredients and fuel resulting from higher commodity prices. These price increases affected items comprising approximately 60% of on-premises sales, and the average price increase on these items was approximately 14%.

Sales to wholesale accounts increased 2.5% to $112.7 million in the first nine months of fiscal 2013 from $109.9 million in the first nine months of fiscal 2012. Approximately 1.8 percentage points of the increase is due to price increases. The Company began implementing price increases for some products offered in the wholesale channel late in the first quarter of fiscal 2012, and substantially completed implementing the increases during the second quarter. Those price increases affected products comprising approximately 60% of wholesale sales, and the average price increase on those products was approximately 11%. Higher selling prices and higher unit volumes accounted for the majority of the increase.

Sales to grocers and mass merchants increased 3.2% to $68.3 million, with a 7.8% increase in average weekly sales per door partially offset by a 4.1% decline in the average number of doors served. In addition to pricing, the Company believes that average weekly sales per door in the grocer/mass merchant channel have grown as a result of, among other things, improved customer service, introduction of additional price points, and the addition of new relatively higher volume doors. The decline in the average number of doors served in the grocery/mass merchant channel reflects store closures by a regional grocery store customer as well as the elimination of loose doughnut sales at another regional grocer, although the Company continues to sell packaged products to this customer. Sales of loose unpackaged products comprised approximately 2% of sales to grocery/mass merchant customers for the nine months ended October 28, 2012, with the balance comprised of sales of packaged products.

Domestic Franchise revenues increased 7.3% to $7.6 million in the first nine months of fiscal 2013 from $7.0 million in the first nine months of fiscal 2012. The increase reflects higher domestic royalty revenues resulting from an increase in sales by domestic franchise stores from approximately $197 million in the first nine months of fiscal 2012 to $210 million in the first nine months of fiscal 2013. Domestic Franchise same store sales rose 5.8% in the first nine months of fiscal 2013.

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