Remember when everyone thought Krispy Kreme (NYSE: KKD) might go under? Those memories seem to be receding with every profitable quarter, but the Street hasn't quite bought the full box yet, as after-hours gains were quickly wiped out this morning. The trend is still positive for shareholders, but it's worth drilling down into the numbers to see where this conveyor belt of sugary profits will lead.
Makin' donuts, makin' money
One big number to consider (but mostly ignore) is $143.5 million, the way-too-high net income for the quarter that's a result of accounting gimmickry. Krispy Kreme actually earned $4 million for the quarter and $22.2 million for the full year. Company-owned same-store sales for the quarter were up an impressive 8.3%, which marks the (lucky) 13th straight quarterly improvement, going all the way back to those ugly days of bankruptcy rumors. Another positive was Krispy Kreme's steady hacking away at what's now a very modest debt pile. It's only $27.6 million, and the company has $44.3 million in cash on hand.
Increases were modest in most cases, and fourth-quarter revenue of $102 million failed to top the company's 2011 first-quarter high-water mark. Contrast that with Dunkin' Brands (Nasdaq: DNKN), which saw revenue growth in each quarter of 2011. Of course, another contrast to Dunkin' might be Krispy's much lower P/E (calculated at 26.6 before the latest one-time boost) and the fact that Dunkin's insiders are fleeing for the exits.
Going forward
Krispy's plans for the current year include opening up to 10 company stores, 10 to 15 domestic franchises, and 75 international franchises. That's a big growth spurt, comparable to Panera Bread's (Nasdaq: PNRA) plan to add 195 new franchises to a current total of more than 1,500 total stores, or Chipotle's (NYSE: CMG) plan to open 165 restaurants, growing from its current base of 1,163. But those two restaurant chains are still focused domestically. Is Krispy Kreme signaling that its U.S. growth is reaching its limits?
Shareholders shouldn't expect the new stores to offer a big bottom-line boost just yet, as 2012 guidance expects lower EPS than Krispy earned over the past year: Management expects $0.21 to $0.24 per share, compared to $0.31 of non-GAAP net income (not affected by the accounting benefit) earned per share in 2011. If you're looking for growth, patience may be a virtue. In the meantime, there will be plenty of donuts to eat from one of the company's 694 total stores. Mmm, donuts.
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