Please ensure Javascript is enabled for purposes of website accessibility

Krispy Kreme Looks To Recuperate Following Middling Public Market Return

By The Daily Upside – Aug 30, 2021 at 9:00PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Five years after being taken private by investment firm JAB Holding, Krispy Kreme returned to public markets on July 1. Two months later, strapped...

For more crisp and insightful business and economic news, subscribe to The Daily Upside newsletter. It's completely free and we guarantee you'll learn something new every day.

Five years after being taken private by investment firm JAB Holding, Krispy Kreme returned to public markets on July 1. Two months later, strapped with debt and rising commodity costs, the glazed pastry empire appears staler than a week-old donut.

Indeed, the road back to public markets came with a few not-so-sweet pills to swallow. But the team at Krispy Kreme has zeroed in on a handful of strategies to drag the lethargic business out of its sticky situation.

Donut Fear The Debt Reaper

Most Krispy Kreme brick-and-mortar locations feature the company's so-called "hot-light theater," where customers can watch a Wonka-esque production line churn out the sugar-blanketed treats.

In the three years leading up to its July IPO, Krispy Kreme was busy reacquiring corporate control over these franchised retail spots with a two-fold goal — increasing sales through company-controlled locations and establishing a wide network of shops to supply fresh-off-the-line donuts to nearby grocery and convenience stores. And the firm was willing to go deep in debt to pull off the maneuver:

  • Krispy Kreme spent roughly $466 million buying out 24 franchisees and 469 global locations. 80% of global sales are now out of company-owned shops, up from 50% in the U.S. and 30% across international markets before the firm was taken private.
  • By the end of 2020, Krispy Kreme had racked up $795 million in net debt. After raising $460 million in the lead-up to an IPO, the company was able to pay down its debt load to $646 million as of August 8.

Now under uniform corporate control, Krispy Kreme hopes its 378 global hot-light locations can provide fresh donuts daily to nearly 8,000 local retail vendors, a significant upgrade to the current 4-to-7-day delivery pipeline.

Krispy In Cairo: As part of its global expansion plans, the glazed donut king is set to soon open its first location in Cairo — the first of 10 locations in Egypt the company hopes to launch over the next 12 months.

Donut Double Down: To encourage COVID vaccinations, Krispy Kreme is doubling its free donut offer for vaccinated customers (effective through Sept. 5). But get your free treat while you can — to keep up with rising sugar and wheat costs, Krispy Kreme is expected to raise donut prices by the end of next month.


Related Articles

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.