Krispy Kreme Doughnuts Inc.
) posted first quarter 2013 adjusted earnings of 14 cents per
share, topping the Zacks Consensus Estimate by 6 cents and the
year-ago earnings by a penny. On a reported basis, Krispy Kreme
earned quarterly earnings of 8 cents per share.
Total revenue climbed 3.7% year over year to $108.5 million in
the quarter. Within segments, company store revenues grew 5.6% year
over year to $73.3 million, Domestic franchise revenue increased
11.1% to $2.6 million and International franchise revenue escalated
6.9% to $6.0 million, driven by higher royalty revenues. Total KK
Supply Chain revenues remained flat year over year at $53.8
Same-store sales at company stores rose 2.1%, reflecting the
fourteenth consecutive quarter of comps growth. Domestic franchise
same-store sales grew 5.8%, but International franchise same-store
sales fell 7.4%. Operating income in the quarter increased to $10.8
million from $9.8 million in the first quarter of 2012.
During the quarter, Krispy Kreme opened 23 franchise stores and
closed 25 franchised stores. At the end of the quarter, the company
operated 92 company stores and 600 franchise stores.
Krispy Kreme ended first quarter 2013 with cash and cash
equivalents of $51.5 million and shareholders' equity of $247.5
million. Long-term debt less current maturities was $24.8 million
versus $25.4 million as of January 29, 2012.
During the quarter, the company also repurchased 255,000 shares
at an average price of $7.27 per share.
The company reaffirmed its outlook for 2013. The company
continues to expect operating income in the range of $29 million to
$33 million, inclusive of impairment and lease termination costs.
Earnings are expected between 21 cents and 24 cents per share. On
an adjusted basis, management expects 35-41 cents in earnings per
share, which includes only income tax. The big difference in both
the guidance is due to an estimated tax rate to 45% for 2013. The
increased tax rate burden arises out of the reversal of valuation
allowances on deferred tax assets in the fourth quarter of fiscal
In 2013, the company plans to open 5 to 10 company stores, 10 to
15 domestic franchise stores and more than 75 international
Krispy Kreme remains focused regarding its expansion plan, menu
innovation and development of its beverage line. Last year,
Krispy Kreme introduced Coffee Blends in cups, brew boxes and fresh
retail bags for home brewing. Buoyed by the strong results in
coffee transaction, the company now looks steadfast to triple
coffee sales by the end of fiscal 2015. At the current level,
on-premises coffee sales account for about 4% of in-store mix.
Moreover, Krispy Kreme puts concerted efforts in menu improvement
to drive traffic in order to excel in its under-penetrated day
parts along with crowded morning and afternoon hours.
The company also remains committed to expanding its business in
both international and domestic markets. Management targets to
operate 900 international stores by the end of fiscal 2017. Krispy
Kreme is also focusing on building new, smaller factory stores in
order to increase its presence in smaller markets.
On the flip side, the company's effective income tax rate for
the years after fiscal 2012 will rise substantially.
Krispy Kreme, which competes with the likes of Einstein Noah
Restaurant Group, Inc.(
Dunkin' Brands Group, Inc.
), currently retains a Zacks #4 Rank that translates into a
short-term Sell rating. We are also maintaining our long-term
Neutral recommendation on the stock.
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