Krispy Kreme (NASDAQ:DNUT) Posts Better-Than-Expected Sales In Q4

Jabin Bastian /
2024/02/13 7:27 am EST

Doughnut chain Krispy Kreme (NASDAQ:DNUT) beat analysts' expectations in Q4 FY2023, with revenue up 11.4% year on year to $450.9 million. It made a non-GAAP profit of $0.09 per share, down from its profit of $0.11 per share in the same quarter last year.

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Krispy Kreme (DNUT) Q4 FY2023 Highlights:

  • Revenue: $450.9 million vs analyst estimates of $438.9 million (2.7% beat)
  • EPS (non-GAAP): $0.09 vs analyst expectations of $0.13 (28.2% miss)
  • Free Cash Flow was -$31.31 million compared to -$36.54 million in the previous quarter
  • Gross Margin (GAAP): 30.5%, up from 28.1% in the same quarter last year
  • Store Locations: 14,147 at quarter end, increasing by 2,310 over the last 12 months
  • Market Capitalization: $2.33 billion

“We reported strong double-digit fourth quarter and full-year organic revenue growth in excess of our guide,” said Josh Charlesworth, CEO.

Famous for its Original Glazed doughnuts and parent company of Insomnia Cookies, Krispy Kreme (NASDAQ:DNUT) is one of the most beloved and well-known fast-food chains in the world.

Traditional Fast Food

Traditional fast-food restaurants are renowned for their speed and convenience, boasting menus filled with familiar and budget-friendly items. Their reputations for on-the-go consumption make them favored destinations for individuals and families needing a quick meal. This class of restaurants, however, is fighting the perception that their meals are unhealthy and made with inferior ingredients, a battle that's especially relevant today given the consumers increasing focus on health and wellness.

Sales Growth

Krispy Kreme is larger than most restaurant chains and benefits from economies of scale, giving it an edge over its smaller competitors.

As you can see below, the company's annualized revenue growth rate of 15.1% over the last four years (we compare to 2019 to normalize for COVID-19 impacts) was impressive as it added more dining locations and expanded its reach.

Krispy Kreme Total Revenue

This quarter, Krispy Kreme reported robust year-on-year revenue growth of 11.4%, and its $450.9 million in revenue exceeded Wall Street's estimates by 2.7%. Looking ahead, Wall Street expects sales to grow 6.8% over the next 12 months, a deceleration from this quarter.

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Number of Stores

The number of dining locations a restaurant chain operates is a major determinant of how much it can sell and how quickly company-level sales can grow.

When a chain like Krispy Kreme is opening new restaurants, it usually means it's investing for growth because there's healthy demand for its meals and there are markets where the concept has few or no locations. Krispy Kreme's restaurant count increased by 2,310, or 19.5%, over the last 12 months to 14,147 locations in the most recently reported quarter.

Krispy Kreme Operating Retail Locations

Over the last two years, Krispy Kreme has rapidly opened new restaurants, averaging 16.1% annual increases in new locations. This growth is among the fastest in the restaurant sector. Analyzing a restaurant's location growth is important because expansion means Krispy Kreme has more opportunities to feed customers and generate sales.

Key Takeaways from Krispy Kreme's Q4 Results

We enjoyed seeing Krispy Kreme beat past analysts' revenue expectations this quarter, driven by strong organic growth and more new store openings than anticipated. That stood out as a positive in these results. On the other hand, its gross margin and EPS missed estimates along with its full-year 2024 earnings forecast. Overall, this was a mediocre quarter for Krispy Kreme. The company is down 4.7% on the results and currently trades at $13.2 per share.

Krispy Kreme may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.