Krispy Kreme (DNUT +4.08%) has long been a brand that evokes nostalgia. For generations of Americans, that glowing "Hot Now" sign meant one thing: A fresh, warm, glazed doughnut -- and often, a moment of indulgent joy.
But while the brand's emotional pull remains strong, its business performance has been far less consistent.
Today, Krispy Kreme finds itself at a critical crossroads. Once again, the company is in the midst of a turnaround, closing underperforming outlets, refreshing its product lineup, and reevaluating its expansion strategy. Investors are watching closely to see whether this latest iteration can finally transform Krispy Kreme into a sustainable growth business.
Image source: Getty Images.
A brand that's bigger than its economics
At its core, Krispy Kreme is a branded consumer business built on simple products and high emotional resonance. Founded in 1937, the company has expanded into a global network spanning more than 40 countries, including both company-owned and franchised stores.
However, while the brand itself is iconic, the business behind it has often struggled to deliver high returns consistently. For instance, operating income fell from $13 million in 2023 to a loss of $9 million in 2024.
The company's capital intensity, which involves owning production hubs, logistics systems, and many of its own shops, and its poor revenue performance have led to inconsistent profitability. For instance, it reported another quarter of operating losses in the quarter ended Sept. 28, 2025.
That mix of brand strength and weak economics has defined Krispy Kreme for decades. The latest management team is now trying to rewrite that story.
NASDAQ: DNUT
Key Data Points
Management is working hard to turn the ship around
While nobody likes an underperforming business, some investors are optimistic that the company could have better days ahead, primarily as the management team works on its turnaround plan. That includes refranchising in key international and local markets, reducing capital intensity, improving efficiency, and pursuing sustainable revenue growth.
So far, the result has been mixed. On a positive note, adjusted EBITDA margin in the latest quarter improved to 10.8%, up from 9.1% a year ago. Digital sales as a percentage of doughnut shop sales increased 190 basis points to 17.4%, indicating that the company is adapting to changes in consumer habits.
Yet, revenue has struggled to grow. Net revenue declined by 1.2% due to the divestment of Insomnia Cookies and the closure of underperforming stores, offset by stronger performance in the international segment.
For investors, it's still too early to conclude the effectiveness of management's strategies. The key to focus on in the coming quarters will be further expansion of margins and a turnaround in revenue performance.
A missed partnership
Perhaps the most talked-about development this year was the end of Krispy Kreme's highly publicized partnership with McDonald's USA. Initially hailed as a significant growth opportunity, the deal was supposed to put Krispy Kreme doughnuts inside thousands of McDonald's restaurants nationwide.
However, just months later, both companies called off the deal, citing unprofitable unit economics. The decision was a setback, but also a telling moment: Even a powerful brand can't overcome weak distribution economics. For investors, it reinforced a central truth: Krispy Kreme's future depends not on opening more doors, but on opening more profitable ones.
While disappointing, the termination of the joint venture allows Krispy Kreme to refocus its energy on improving the economics of its existing business, which could lead to a better return on investment over the long term.
What does it mean for investors?
Krispy Kreme remains a business in transition -- average today, with the potential to become good tomorrow. The brand is timeless, but the economics are not. Management deserves credit for prioritizing profitability over sheer expansion and for showing early signs of margin recovery.
Still, the company has a long way to go before it earns a place among durable consumer compounders. For now, Krispy Kreme is a turnaround story.
If it can sustain its margin gains, execute its capital-light pivot, and rekindle revenue growth, this could become one of the more interesting stories in the coming quarters. Until then, it's a stock to watch -- not yet one to bite into.
