Krispy Kreme (NASDAQ:DNUT) appeals to anyone with a sweet tooth, but its second-quarter earnings report failed to delight Wall Street. Missing consensus targets for the top and bottom lines, the company added to the woes with a full-year 2022 guidance downgrade. Several headwinds — even including European heat waves — are negatively affecting DNUT stock.
On Wednesday, the doughnut and coffeehouse chain reported a loss of $3.8 million in Q2. This translates to a loss of 2 cents per share. Earnings “adjusted for one-time gains and costs” also came out to 8 cents per share. Unfortunately, that result missed the consensus target for earnings of 9 cents per share.
On the top line, Krispy Kreme also rang up revenue of $375.2 million. Although this tally represents year-over-year (YOY) growth of 7.5%, it failed to meet expectations. Analysts had targeted sales of $383.2 million.
Adding to the troubles for DNUT stock, Krispy Kreme also disclosed a full-year guidance downgrade. According to Barron’s, “Krispy Kreme now expects adjusted 2022 earnings to range from 29 cents to 32 cents a share, down from 38 cents to 41 cents a share.” Additionally, revenue for 2022 “will now range from $1.49 billion to $1.52 billion, down from a range from $1.53 billion to $1.56 billion.” FactSet surveyed analysts who expected full-year earnings of 41 cents per share on revenue of $1.56 billion.
A Series of Woes Doomed DNUT Stock
On a year-to-date (YTD) basis, DNUT stock is down more than 30% as of Wednesday afternoon. In the recent report, executives framed the Q2 results as a broader mitigation against significant pressures. Krispy Kreme President and CEO Mike Tattersfield said the following:
“In the second quarter consumers faced unique economic pressures, which is why we invested in our customers through Acts of Joy such as Beat the Pump dozen pricing that matched a gallon of gas and other promotions to drive brand love.”
To be fair, DNUT stock has endured multiple headwinds. As a consumer-facing enterprise, inflation and the subsequent erosion of the dollar’s purchasing power negatively impacted discretionary spending. In addition, the Federal Reserve’s response — the tightening of money supply — increased the value of the dollar relative to other currencies. Thus, Krispy Kreme suffered an adverse effect from foreign currency exchange.
Nature stymied the company on the international front as well. Management noted that the heat waves that blasted the U.K. hurt global sales. Per The New York Times, unusually hot weather is also carrying over, implying similar challenges for Q3.
Why It Matters
Since launching its initial public offering (IPO) in July 2021, DNUT stock is down nearly 33%. Although the initial return to normal from the pandemic bolstered shares, Krispy Kreme now faces a different consumer paradigm. Accordingly, management needs to dig deep to right the ship in these troubled waters.
On the date of publication, Josh Enomoto did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.