Krispy Kreme Tumbles as Earnings, Revenue and Guidance Disappoint

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By Sam Boughedda

Shares of Krispy Kreme Inc (NASDAQ:DNUT) fell 12% at the open Wednesday after the company reported earnings, missing analyst expectations.

Krispy Kreme posted second-quarter earnings of $0.08, $0.02 worse than the analyst estimate of $0.10, while revenue for the quarter came in at $375.2 million below the consensus estimate of $385.32 million.

The company said it faced "unique economic pressures" during the quarter, with headwinds including increased labor and commodity cost and an approximately $2.7 million negative impact from FX, primarily the strength of the U.S. dollar.

"In the second quarter consumers faced unique economic pressures, which is why we invested in our customers through Acts of Joy such as Beat the Pump dozen pricing that matched a gallon of gas and other promotions to drive brand love. After the end of the second quarter, we took successful pricing actions in the U.S. and U.K. markets and we have seen a significant deceleration in key commodity costs for 2023 in recent weeks," commented President and CEO of Krispy Kreme Mike Tattersfield.

Looking ahead, the company said it sees full-year 2022 earnings per share between $0.29 and $0.32, below the consensus of $0.41, while revenue for the period is expected to be between $1.49 billion and $1.52 billion, versus the consensus of $1.56 billion.

Following the report, a Goldman Sachs analyst said in a note to investors: "DNUT reported total revenues of $375.2mn (-3.4%/-2.6% vs GS/Consensus Metrix estimates), driven by U.S. sales of $250.5mn (-5.7%/-4.5% vs GS/Consensus Metrix), while International sales of $93.9 were essentially in-line (-10bps vs GS/+60bps vs CM), and Market Development was better than expected ($30.9mn, +7% vs GS/+1.5% vs CM), with FX driving a ~2.6% top-line headwind. Organic growth in the U.S./Canada of 6% was much lower than expected (GS 14.1% / Cons 14.6%), while International 13% organic growth was better than GS, but FX drove a 2.6% headwind in the quarter."

"DNUT also reduced its outlook for capex spending to $105-$110mn driven by a shift to lower cost POAs and FX benefits on international spend, and the company now expects to end the year at net leverage of ~3.6x (up from ~3.0x prior) due to the acquisition of a franchisee in the U.S. (expected in August) and FX headwinds. DNUT now expects to achieve its ~3.0x target by the end of FY23," added the analyst. "We expect DNUT shares to underperform today on the 2Q top-line/earnings miss and the reduced FY22 outlook."