Shares of Krispy Kreme Doughnuts (KKD) surged last Friday, after the company reported first quarter earnings that topped analyst estimates and followed up with lofty guidance. For the quarter, Krispy Kreme earned $0.20 per share, a 43% year-on-year increase from the prior year and easily topping the consensus estimate of $0.17. Sales rose 11% to $120.6 million, also beating the $116.3 million that Wall Street expected.
Looking ahead, Krispy Kreme raised its full year earnings forecast to a range between $0.59 to $0.63 per share, up from the $0.53 to $0.57 per share it had previously forecast. Krispy Kreme attributed its solid first quarter earnings and optimistic guidance to increased consumer confidence in a steadily recovering economy. CEO James Morgan was also upbeat regarding Krispy Kreme’s double-digit jump in same-store sales, stating, “We delivered our 18th consecutive quarter of increased same-store sales at company stores, which rose an astounding 11.4%.” However, the company stated that same-stores sales in the next three quarters were “likely to be less dramatic” than its previous performance.
Investors were definitely impressed by Krispy Kreme’s numbers, sending the stock to a high not achieved since mid-2004. Shares of Krispy Kreme have risen more than 50% over the past twelve months. Krispy Kreme, which nearly fell to $1 per share at the depths of the financial crisis, was once left for dead by investors after an accounting scandal in the mid-2000s derailed years of brand-building. The stock nearly traded at $50 per share ten years ago.
The company’s recent initiatives included an increased social media presence, adding more 24-hour locations and a wider variety of beverage offerings. Krispy Kreme is also testing a new store model, which it calls “small freestanding factory shops” which only cater to retail customers. Many Krispy Kreme stores also ship their donuts to grocery and convenience stores.
Krispy Kreme also has ambitious plans for increasing its global presence to catch up to its larger rival, Dunkin’ Donuts (DNKN). Krispy Kreme currently operates 770 global locations. It intends to increase its store count to 1,300 locations by 2017.
Although Krispy Kreme looks like it is back on track to reclaiming some of its lost glory, there are some concerns that the stock, trading at nearly 60 times trailing earnings, is getting overheated. In addition, its overseas expansion is likely to run into some heavy competition from Dunkin’ Donuts and Starbucks (SBUX), which have saturated several major growth markets. Shares of Krispy Kreme currently trade at 23.7 times forward earnings with a 5-year PEG ratio of 1.1, which indicates that if analysts’ growth projections are correct, then it could keep rising and eventually reconcile its high-flying price with its premium valuation.
Other News About KKD
Krispy Kreme’s stock rushes on a sugar high.
Krispy Kreme’s earnings in a nutshell.
Copyright 2013 by InvestorGuide.com, Inc. InvestorGuide has no control over the sites we link to, is not affiliated with these sites, and cannot take responsibility for their quality or suitability. The news, analysis, commentary and profile information is not meant to be comprehensive, and the data provided is not guaranteed to be accurate. WebFinance Inc., the publisher of this newsletter, is not a registered investment advisor or a broker/dealer. This is not a stock recommendation newsletter but rather a source for investment ideas, and we encourage you to fully research any company before considering investing. The opinions expressed herein are those of the author and do not necessarily represent the views of nor are they endorsed by WebFinance Inc.
No employee of WebFinance has owned or currently owns any shares in the company described above. The above is neither an offer nor solicitation to buy or sell any securities. The trading of securities may not be suitable for all potential readers of this newsletter, and the purchase of stocks mentioned in this newsletter may result in the loss of some or all of any investment made. We recommend that you consult a stockbroker or financial advisor before buying or selling securities or making investment decisions.
We are not responsible for claims made by advertisers and sponsors. Anyone who makes decisions based on what they read here does so at their own risk and cannot hold WebFinance Inc. (DBA InvestorGuide.com, Inc.) or its employees responsible.