Krispy Kreme is ramping up investment in its US expansion and international franchise model, even as short-term earnings reflect a more cautious global consumer environment.
The doughnut company reported first-quarter net revenue of $375.2 million, a 15.3 per cent decline year-over-year. The drop was driven by a $64.3 million reduction following the sale of a majority stake in Insomnia Cookies late last year.
Organic revenue edged down by 1 per cent, or $3.6 million, as growth in the Delivered Fresh Daily (DFD) model and increased global points of access were offset by lower transaction volumes at doughnut shops.
Krispy Kreme recorded a GAAP net loss of $33.4 million, widening from a $6.7 million loss a year earlier. Adjusted EBITDA declined to $24 million, with a margin of 6.4 per cent. The adjusted net loss was $8.8 million.
CEO Josh Charlesworth said the company is focused on becoming more efficient and disciplined to drive long-term profitability.
“Our ability to become a bigger Krispy Kreme requires that we become better, and we are taking swift and decisive action to pay down debt, de-leverage the balance sheet and drive sustainable, profitable growth,” he said.
“While we expect the macro environment to remain challenging, we are focused on positive cash flow, higher returns on capital, and our two biggest opportunities: Profitable US expansion and capital-light international franchise growth.”
In the US, revenue fell by $59.4 million, or 20.1 per cent, mostly due to the Insomnia Cookies divestment.
Organic revenue dropped 2.6 per cent, as a 34.9 per cent increase in points of access was offset by softer consumer demand.
The company also reported lower average revenue per door per week, citing operational inefficiencies related to a cybersecurity incident that cost an estimated $5 million.
International revenue declined by $5.1 million, or 4.1 per cent, due to foreign currency headwinds. Organic revenue rose by 1.5 per cent, led by growth in Canada.
However, adjusted EBITDA in the international segment fell 27.5 per cent due to reduced transaction volumes and shifting market conditions.
Krispy Kreme said it is revamping its strategy in the UK to improve customer engagement and pricing.
Despite the short-term pressure, the company reaffirmed its long-term focus on expanding in the US and growing internationally through a capital-light franchise model.
As of March, Krispy Kreme doughnuts are available in more than 2400 McDonald’s locations nationwide.
The company is currently re-evaluating its rollout schedule with the fast-food chain to ensure a profitable expansion. No additional rollouts are planned for the second quarter.
