What Happened:
Shares of doughnut chain Krispy Kreme (NASDAQ:DNUT) jumped 36.5% in the afternoon session after the company announced in a press release that it would provide fresh doughnuts daily at McDonald's restaurants nationwide (in the United States). According to the report, the phased rollout will begin in the second half of 2024, with nationwide availability expected by the end of 2026. This is positive news for Krispy Kreme as the move should accelerate its sales velocity and eventually be accretive to revenue growth given the power of the McDonald's brand.
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What is the market telling us:
Krispy Kreme's shares are not very volatile than the market average and over the last year have had only 6 moves greater than 5%. Moves this big are very rare for Krispy Kreme and that is indicating to us that this news had a significant impact on the market's perception of the business.
The biggest move we wrote about over the last year was 5 months ago, when the stock dropped 8.5% on the news that the company reported third quarter results with revenue, gross margin, adjusted EBITDA, and EPS all falling below analysts' expectations. These misses were driven by underperformance in its U.S. division, which accounted for 63.9% of sales. A number of restaurant and other discretionary companies highlighted an uncertain consumer spending environment in the US. On top of that, its revenue guidance for the full year was underwhelming.
On the bright side, it opened more stores than projected, giving it more opportunities to grow its top line in the future. Overall, this was a bad quarter for Krispy Kreme.
Krispy Kreme is up 17.1% since the beginning of the year. Investors who bought $1,000 worth of Krispy Kreme's shares at the IPO in June 2021 would now be looking at an investment worth $821.67.
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