Krispy Kreme Doughnuts Inc.'
) second-quarter fiscal 2014 adjusted earnings of 14 cents per
share missed the Zacks Consensus Estimate of 15 cents by a penny.
Earnings per share, however, beat the year-ago quarter's earnings
of 12 cents by 16.7% on the back of solid top-line growth.
Quarterly revenues increased 10.4% year over year to $112.7
million. Higher same-store sales at company-owned units,
increased traffic and strong franchise revenues backed the
year-over-year rise in top line. Revenues also surpassed the
Zacks Consensus Estimate of $110 million by 2.5%.
Operating income in the quarter was $10.6 million, up 14.8%
year over year, driven by higher top line.
Behind the Headline Numbers
Krispy Kreme earns revenues from its Company Stores, Franchise
(International and Domestic) segment and KK Supply Chain
revenues were up 9.2% year over year to $75.7 million on the back
of solid comps growth at company stores and higher sales gain
from the refranchised stores. With the rise in traffic, the
segment's comps grew 10% during the quarter, marking the
nineteenth consecutive quarter of positive comps growth.
revenues stood at $2.8 million, up 15.2% from the year-ago
quarter, thanks to increased royalties and an 11.5% rise in
domestic franchise comps.
revenues escalated 4.8% to $6.1 million with the rise in royalty
revenues. However, comps at international franchise stores were
down 8.6% (impact of currency translation excluded) mainly due to
a prolonged honeymoon effect at new stores, which is
cannibalizing sales at older stores in the market. Comps in the
quarter were also adversely affected by the shift in holiday
timings in the company's several international locations and warm
weather in the U.K.
KK Supply Chain
revenues rose 11.1% year over year to $57.2 million, fueled by
positive doughnut mix and increased selling prices.
During the quarter, the company approved a new stock
repurchase program, thereby maintaining the trend of returning
wealth to its shareholders from time to time. Under this program,
the company is authorized to repurchase up to $50.0 million worth
of its common stock with immediate effect. As of Aug 4, 2013,
Krispy Kreme had approximately 71 million shares outstanding.
During the quarter, Krispy Kreme opened two company-owned and
20 franchise stores. In addition, Krispy Kreme closed five
international franchised stores and one company stores. At the
end of the quarter, the company operated 93 company stores and
696 franchise stores.
Krispy Kreme is focusing on building new, smaller factory
stores in order to increase its presence in smaller markets. The
company intends to open 4-5 smaller prototype units in fiscal
2014. Krispy Kreme also plans to operate 900 international stores
by early 2017.
Krispy Kreme reaffirmed its outlook for fiscal 2014. Adjusted
earnings are expected to be between 59 cents and 63 cents per
share, up 26%-34% from the year-ago quarter.
Krispy Kreme is gradually moving in a positive direction.
Double-digit earnings growth, higher top line, various strategic
alliances, expansion of its franchising business and effective
utilization of cash provided the company a shot in the arm.
Krispy Kreme's increasing focus on expansion efforts and menu
innovation is continuously boosting its comps. Moreover, the
company's newly launched smaller factory stores are also
contributing to its business.
Others players in the same industry, which look attractive at
current levels, include
AFC Enterprises Inc
Domino's Pizza, Inc.
CEC Entertainment Inc.
). All these stocks carry a Zacks Rank #2 (Buy).
AFC ENTERPRISES (AFCE): Free Stock Analysis
CEC ENTERTANMNT (CEC): Free Stock Analysis
DOMINOS PIZZA (DPZ): Free Stock Analysis
KRISPY KREME (KKD): Free Stock Analysis
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