Krispy Kreme Beats, Raises Outlook

Krispy Kreme Doughnuts Inc.’s (KKD) second quarter fiscal 2011 earnings were 3 cents per share, which outdid the Zacks Consensus Estimate of zero per share. The company also reported profit of $2.2 million compared to a loss of $0.16 million posted in the prior-year quarter. The better-than-expected results were driven by a growth in the top line.

Total revenue climbed 6.3% year – over – year to $87.9 million and also out performed the Zacks Consensus Estimate of $84.0 million. All the four segments reported increase in revenues. Segment-wise, Company stores revenues were flat year over year at $60 million, Domestic franchise revenues spiked up 15.1% to $2.1 million, International franchise revenues upped 5.3% to $4.0 million and KK Supply Chain revenues (including sales to Company stores) were up 18.9% to $44.9 million.

For the seven consecutive quarters, same store sales at Company stores rose 5.7%. Domestic franchise same store sales grew 5.0%, while International franchise same store sales declined 14.3%.

Direct operating expense, as a percentage of total revenue, surged 140 basis points to 87.5% and general and administrative expenses dropped 20 basis points to 5.6%. As a result, operating income expanded 41.2% to $4.2 million and operating margin perked up 110 basis points to 4.7%.

Interest expense reduced $0.7 million from the prior-year quarter to $1.6 million due to a decline in debt.

Stores Update

During the quarter, Krispy Kreme opened 20 franchise stores and 2 company-owned stores and closed 4 franchises and 1 company-owned store. Thus, as of August 1, 2010, the company has 84 company stores and 549 franchise stores.

Financial Position

Krispy Kreme ended second quarter 2011 with cash and cash equivalents of $21.2 million and shareholders’ equity of $72.8 million. As of August 1, 2010, long-term debt was $41.2 million versus $42.7 million at the end of January 31, 2010.


Based on the first half results, the company raised its adjusted operating income guidance for fiscal 2011. The company now expects adjusted operating income in a range of $13 million to $17 million, up from its previous forecast in the range of $11 million to $15 million.

KRISPY KREME (KKD): Free Stock Analysis Report

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