Release Date: May 08, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Krispy Kreme Inc (DNUT, Financial) is focused on profitable US expansion and international franchise growth, aiming for 100,000 points of access.
- The company is spotlighting its original-based doughnut, which appeals to value-conscious consumers and delivers higher margins.
- Krispy Kreme Inc (DNUT) is expanding its presence in club stores like Costco and Sam's Club, achieving high sales volumes.
- The company is outsourcing its fresh doughnut delivery to improve efficiency and reduce costs, with plans to fully outsource US logistics by mid-next year.
- International franchise partners are delivering strong results, with successful launches in markets like Brazil and France.
Negative Points
- Organic revenue declined by 1% due to consumer softness in a challenging macro environment.
- The company is experiencing a decline in adjusted EBITDA, impacted by the sale of Insomnia Cookies and cybersecurity issues.
- Krispy Kreme Inc (DNUT) is pausing its expansion with McDonald's due to lower-than-expected demand after initial marketing efforts.
- The company is discontinuing quarterly dividends to focus on paying down debt and improving financial flexibility.
- There is a planned reduction in discount days, which contributed to a decline in organic revenue in the US segment.
Q & A Highlights
Q: How are you thinking about CapEx given the current changes and the McDonald's decision to pause? Was it your decision or McDonald's?
A: Jeremiah Ashukian, CFO: Our capital priorities focus on strengthening the balance sheet and business reinvestment. We're becoming more disciplined with capital allocation, investing in high-return areas. The McDonald's pause allows us to adjust spending.
Joshua Charlesworth, CEO: We're confident in the US expansion but need to ensure profitable growth. We're working with McDonald's to improve sales and simplify operations before further expansion.
Q: How aggressive will you be in pruning underperforming locations in the US?
A: Jeremiah Ashukian, CFO: We're focused on driving profitable growth, which includes rationalizing our portfolio. We could exit 5 to 10% of doors in the US network this year.
Q: Can you explain the re-franchising process for international markets and any expected cash proceeds?
A: Jeremiah Ashukian, CFO: We don't need to re-franchise to fuel US growth and have ample liquidity. We're looking for the right partner to grow the business efficiently. Proceeds will be used to pay down debt.
Q: Why didn't you see a falloff in demand in McDonald's test markets compared to the broader rollout?
A: Joshua Charlesworth, CEO: We're pleased with the McDonald's partnership execution but need sustainable profitability. We're working to ensure doughnut visibility and streamlined operations before further expansion.
Q: Was the $5 million inefficiency related to cybersecurity expected, and is it ongoing?
A: Jeremiah Ashukian, CFO: It was included in our guidance and related to inefficiencies in managing labor and materials. The issue is now resolved, and we're operating more efficiently.
Q: What caused the sales decline despite increased distribution points?
A: Jeremiah Ashukian, CFO: Revenue was in line with expectations, impacted by the sale of Insomnia Cookies and consumer softness in retail. We planned a reduction in discount days to drive profitable growth, resulting in a 2.6% organic revenue decline.
Q: Was the decision to pause McDonald's expansion yours or theirs, and what changed?
A: Joshua Charlesworth, CEO: Decisions are made jointly with McDonald's. Sales started strong but dropped post-marketing. We're confident in long-term opportunities but need to ensure profitable growth before expanding further.
Q: How does the McDonald's pause affect your CapEx spend?
A: Joshua Charlesworth, CEO: We're expanding with several scale customers and continue to support national distribution. We're making thoughtful capital allocation choices to ensure profitable growth and deleverage the balance sheet.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
