Krispy Kreme Doughnuts Inc.
) posted first quarter 2013 adjusted earnings of 12 cents per
share. The results surpassed the Zacks Consensus Estimate by 7
cents and the year-ago earnings by 6 cents. On a reported basis,
Krispy Kreme earned quarterly earnings of 7 cents per share.
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Total revenue climbed 4.3% year over year to $102.1 million in the
quarter. Within segments, company store revenues grew 5.1% year
over year to $69.3 million, Domestic franchise revenue increased
3.4% to $2.4 million and International franchise revenue escalated
8.0% to $5.8 million, driven by higher royalty revenues. Total KK
Supply Chain revenues inched up 2.2% year over year to $51.5
Same-store sales at company stores increased 5.4%, reflecting the
15th consecutive quarter of comps growth. Domestic franchise
same-store sales grew 6.7%, but International franchise same-store
sales fell 10.0%. Operating income in the quarter expanded 87% to
$9.0 million in the second quarter of 2012.
During the quarter, Krispy Kreme opened one company-owned and 24
franchise stores. The company also closed 6 franchised stores. At
the end of the quarter, the company operated 93 company stores and
618 franchise stores.
Krispy Kreme ended the second quarter of 2013 with cash and cash
equivalents of $41.0 million and shareholders' equity of $235.1
million. Long-term debt less current maturities was $24.3 million
versus $25.4 million as of January 29, 2012.
During the quarter, the company completed its $20 million share
repurchase program with the repurchase of 2,858,000 shares at an
average price of $6.35 per share.
Krispy Kreme reaffirmed its outlook for 2013, but expects overall
results to be at the higher end of the previously guided range. 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 22 cents and 25
cents per share. On an adjusted basis, management expects earnings
per share of 36-42 cents, which includes only income tax. The big
difference in both guidance is due to an estimated tax rate of 45%
for 2013. The burden of the increased tax rate arises out of the
reversal of valuation allowances on deferred tax assets in the
fourth quarter of fiscal 2012. Moreover, both the adjusted and GAAP
EPS range for 2013 is a penny higher than the previously guided
range, aided by the completion of the $20 million share repurchase
In 2013, the company plans to open 5 to 10 company stores, 10 to 15
domestic franchise stores and more than 75 international franchise
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 transactions, the company now looks steadfast to triple its
coffee sales by the end of fiscal 2015. Moreover, Krispy Kreme puts
concerted efforts to improve its menu in order to drive traffic,
particularly on doughnuts, which is preferred by a large number of
The company also remains committed to expand 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.
However, stiff competition, lower consumer confidence, higher input
costs and effective income tax rate remain areas of concern.
Krispy Kreme, which competes with the likes of
Einstein Noah Restaurant Group, Inc.
Dunkin' Brands Group, Inc.
), currently carries a Zacks #1 Rank that translates into a
short-term Strong Buy rating. We are also maintaining our long-term
Neutral recommendation on the stock.