Krispy Kreme Doughnuts (KKD) is rolling out a new promotion tomorrow. On Dec. 12, when customer’s buy a dozen Krispy Kreme doughnuts they get another dozen for free. Unfortunately, catchy promotions aren’t really doing Krispy Kreme Doughnuts any favors.
Earlier this week, Krispy Kreme reported weak third-quarter earnings. With increased competition and struggling incentives, can KKD bounce back from this rut?
Krispy Kreme Doughnuts – Company Overview
Krispy Kreme is an American doughnut shop, which was founded over 75 years ago. Over the years, Krispy Kreme Doughnuts has introduced a wide range of interesting flavors, including a 20-calorie glazed wheat doughnut, New York Cheesecake and even one made with Cheerwine soda.
Krispy Kreme Doughnuts also sells a variety of coffee beverages, iced drinks, smoothies and sundaes. Its products are sold in stand-alone Krispy Kreme stores as well as grocery stores and gas stations.
In 2013, KKD brought in $460 million in total sales. Krispy Kreme has approximately 925 stores in 20 countries and employs 2,500 full-time employees.
Krispy Kreme Doughnuts – Earnings Rundown
In the third quarter, Krispy Kreme reported adjusted net income of $12.1 million or 18 cents per share, missing analysts’ estimates of 19 cents per share. Compared with Q3 2013, Krispy Kreme’s revenues increased 7.6% to $122.9 million. Looking ahead to the fourth quarter, Krispy Kreme forecasts per share earnings of 16 cents on revenue of $125.7 million.
For fiscal 2015, KKD estimates adjusted net income between $48 million and $51 million or between 69 cents per share and 74 cents per share. Krispy Kreme Doughnuts also plans to boost beverage sales in an effort to increase store traffic. CEO Tony Thompson stated:
“Leveraging consumers’ love of our brand means more than just increasing doughnut purchases, as our coffee and other specialty beverages can and should play a larger role in our total sales mix over time. Our goal is to achieve a higher beverage attachment rate within our stores and greater beverage consumption at home, at work and on-the-go.”
Krispy Kreme Doughnuts – Current Ratings
For much of the past year, KKD has stayed firmly in “hold” or “sell” territory, and that pattern continues as Krispy Kreme Doughnuts’ buying pressure is weak. Krispy Kreme receives a C for its Quantitative Grade.
Meanwhile, KKD stock’s fundamental metrics are a mixed bag. Currently, Krispy Kreme flat out fails in earnings surprises (F) and earnings momentum (D). Sales growth, analysts’ earnings revisions, and cash flow earn lackluster C grades. Krispy Kreme receives an A for its operating margin growth and B grades for return on equity and earnings growth. Overall, KKD earns a C for its Fundamental Grade.
As of this posting, Dec. 11, 2014, KKD stock is a C-rated “hold.” Krispy Kreme Doughnuts is doing well in terms of most of its fundamentals, but it is going to have to firm up its buying pressure if it wants to make its way onto my plate.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
