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Krispy Kreme Delights Once Again

By Keki Fatakia – Updated Nov 7, 2016 at 12:11PM

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Krispy Kreme posts a near-twofold rise in third-quarter net profits.

Krispy Kreme Doughnuts (NYSE: KKD) seems to have done it again. The company posted an almost two-fold jump in third-quarter net income, which beat analysts' expectations, on the back of growth across all of its divisions. So let's take a closer look at Krispy Kreme's results.

Great numbers
Krispy Kreme posted an astounding 96% jump in net profits to $4.7 million, which was aided by lower interest expenses, which amounted to just $385,000. The number is a lot lower than the $1.6 million it had to shell out in the year-ago quarter. This huge drop was achieved thanks to lower interest rates after the refinancing the company did back in January 2011 combined with even lower debt levels. Total revenue saw a 9.4% increase to $98.7 million mainly on the back of better performance across all of its divisions.

Krispy Kreme's same-store sales growth, an important metric for retail, also saw an uptick of 4%, but that was lower than industry peer Dunkin Brands' (Nasdaq: DNKN) 6% comps growth, Starbucks' (Nasdaq: SBUX) 10%, and Tim Hortons' (NYSE: THI) U.S. same-store sales. According to the company, the opening of new stores in some locations may have taken a bite off the business of existing ones.

While Krispy Kreme's company-store sales saw a 9.8% increase in revenues, domestic franchise sales were also up by 14%. The company had to increase prices to offset the effects of higher input costs and less traffic.

Krispy Kreme's international franchise also posted solid revenue that was up by 22% to $5.4 million, while the company's KK supply chain also managed to post 5.3% higher revenue at $23.4 million after making adjustments for inter-segment sales. The KK supply chain is a division that makes doughnut-making machines and mixes.

The company also plans to open between five and 10 company stores in fiscal 2013 coupled with 10 to 15 franchise stores in the U.S alone. KKD is keen to open as many as 60 franchise outlets in other parts of the world.

More doughnuts
Krispy Kreme recently launched two new chocolate-flavored treats to add to its growing range of donuts, which are sold by grocery stores and mass merchants. The two new creamy treats are glazed chocolate pie and dipped cake doughnuts, which hit the stores in November.

The Foolish bottom line
Krispy Kreme has come out with a good set of numbers across the board. In order to maintain its success, the company has to devise tasty ways of enticing customers and handling high input costs. What do you Fools think about the doughnut maker's future? Leave your responses in the comments section below. Also, don't forget to add Krispy Kreme to your watchlist. It's free and keeps you up to speed with the latest news and analysis for your favorite companies. Simply click here.

Fool contributor Keki Fatakia does not hold shares in any of the companies mentioned in this article. The Motley Fool owns shares of Starbucks. Motley Fool newsletter services have recommended buying shares of Starbucks. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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