Krispy Kreme Shares Slip as Net Profit Spirals and Revenue Increases

Andrew Klips  |

Krispy Kreme Doughnuts Inc. (KKD) reported after Thursday’s closing bell that net profits during the fourth quarter plunged by 97 percent, although the year prior quarter benefited heavily from an income tax gain.  On the whole it was a bit of a dizzying flurry of numbers as profits plunged more than analysts thought, but the company boosted its outlook for fiscal 2014 with the high end topping analyst expectations.

For the fourth quarter, ended February 3, the doughnut chain operator reported revenue increased 15.9 percent to $118.1 million, compared to $102.0 million in the year prior quarter. Net income for the quarter was $4.8 million, or 7 cents per share, versus $143.5 million, or $2.01 per share, in the fourth quarter of 2011.  The 2011 quarter included an unusual credit of $139.6 million from the reversal of valuation allowances on deferred income tax assets.  Non-GAAP net income equaled $7.4 million, or 11 cents per share, up from $4.0 million in the year prior quarter

Wall Street was still expecting earnings per share of 12 cents on revenue of $115.9 million.

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Krispy Kreme chief executive and chairman James Morgan focused on the positive.  "In the fourth quarter, Krispy Kreme not only achieved earnings at the top end of our November guidance, but also posted its best fourth quarter results since fiscal 2004. The year as a whole also was our best since fiscal 2004, and demonstrated again the strength of our business model and affirmed our confidence in achieving our goal of sustainable and profitable growth for years to come,” he said.

Corporate-owned same-store sales increase by 7.5 percent in the latest quarter as franchise same-store sales grew by 9.6 percent domestically, but tumbled 7.4 percent internationally.

Revenue from KK Supply Chain, the corporate arm that makes doughnut mixes and equipment, were up by 1.8 percent to $52.9 million.

For the 53-week fiscal 2013 year, the company reported revenue of $435.84 million, compared to $403.22 million in the 52-week fiscal 2012 year.  Net income for the latest year totaled $20.78 million, or 30 cents per share, down from $166.27 million in 2011, or $2.33 per share, which included the tax benefit.

Looking forward, Krispy Kreme said that it sees fiscal 2014 adjusted net income in the range of $37 million to $40 million and adjusted earnings per share between 53 cents and 57 cents. In November, the company forecast earnings for the year ranging between 49 cents and 55 cents.

The guidance was in line with consensus estimates of earning per share of 52 cents.

Shares of KKD closed regular trading effectively flat on the day, but fell by more than 5 percent in extended trading to $14.15.  Over the past 52 weeks, shares have scaled 71 percent higher. Even more impressive is the move from August lows of $5.96, with the stock soaring 138 percent in less than 8 months.

[Image via Flickr]

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