Krispy Kreme Shares Fall Due to Poor Full-Year Outlook

The doughnut and coffeehouse chain Krispy Kreme experienced a sharp drop in its share price after missing second-quarter earnings estimates.
Aug. 18, 2022
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Krispy Kreme (NASDAQ: DNUT) -- the doughnut and coffeehouse chain -- saw a drop in its share price after the company missed analyst expectations for both revenue and earnings in its second-quarter earnings report. This is the third time the company has missed analyst expectations out of the past four earnings reports, and this caused the share price to decline by 12.12% yesterday. So, how bad were the results?

What were the key points from Krispy Kreme's earnings report?

Krispy Kreme recorded revenues of $375.24 million, representing a year-over-year (YoY) growth rate of 7.5% -- 2.77% below the analyst's consensus of $385.94 million. Organic growth was driven by the performance and expansion of Krispy Kreme's omnichannel model and strong performance in Australia and Mexico, the Market Development segment, and Insomnia Cookies. 

The company's sales per hub -- locations where doughnuts are produced and processed for sale at any point of access -- saw strong growth during the quarter. Sales per hub in the U.S. and Canada increased by 22.2% YoY to $4.4 million due to a 9% increase in weekly sales per Delivered Fresh Daily door. Sales per international hub grew by 22.5% over the same period to $9.8 million due to a 19% growth rate in Global Points of Access. However, Krispy Kreme's e-commerce segment saw revenue as a percentage of net sales drop by 110 basis points to 17.5%, which may be partly responsible for the lower recorded profits.

The company recorded adjusted diluted earnings per share (EPS) of $0.08, 16.64% less than the analysts' forecast of $0.10 per share. Krispy Kreme's EPS in the quarter was also $0.06 per share lower than the results during the same period last year. The company claims this was primarily due to the number of diluted weighted average shares outstanding increasing from 135.9 million last year to 169.3 million this year due to the IPO. 

Krispy Kreme also lowered its full-year revenue and net income guidance from estimates made at the start of the year. Net revenue is forecast to reach $1.49 billion to $1.52 billion for the year, a downward revision from the earlier estimate of $1.53 billion to $1.56 billion. This includes impacts from foreign currency fluctuations. Guidance for net income was also revised from $65 million to $69 million to a range of $49 to $54 million. 

How did investors respond to Krispy Kreme's earnings report?

Investors were disappointed with the company's results, which caused the share price to drop by 12.12%, with a further drop of 0.47% in pre-market trading today. The consistent underperformance by the company appears to have rattled investors, who are now losing faith in its ability to generate reliable growth. This has caused the company's shares to fall over 33% lower than its IPO price of $19.12 in July last year. 


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