Winston-Salem, N.C.-based Krispy Kreme Doughnuts Inc. reported financial results for the fourth quarter and fiscal year 2011, ended Jan. 30.
Among the highlights was a revenue increase of 4.5 percent, to $362 million from $346.5 million. Company same-store sales were also up 4 percent, the second consecutive annual increase for the doughnut chain. Also:
- Operating income increased to $15.2 million from $11.8 million, including the effects of impairment charges and lease termination costs of $4.1 million and $5.9 million, respectively;
- Net income was $7.6 million, or $0.11 per share diluted, compared to a net loss of $0.2 million, or $0.00 per share last year;
- Total outstanding debt fell by $8.1 million to $35.4 million;
- Cash provided by operating activities increased to $20.5 million from $19.8 million
Q411 results
The fourth quarter was also strong compared to the year-ago period. Revenues increased 5.7 percent to $91.7 million from $86.8 million
Company same-store sales rose 2.2 percent, which was the ninth consecutive quarterly increase. This is despite severe weather conditions in January. Also:
- Operating income decreased to $0.9 million from $2.4 million, reflecting a $600,000 increase in impairment charges and lease termination costs and an $800,000 reduction in favorable insurance adjustments compared to last year;
- The fourth quarter of fiscal 2011 reflects a $1.0 million charge related to debt refinancing, while last year's fourth quarter included a one-time income tax credit of $600,000;
- The net loss was $1.5 million, or $0.02 per share, compared to net income of $0.5 million, or $0.01 per share diluted for Q410
At the end of the fiscal year, there were a total of 646 Krispy Kreme stores systemwide, consisting of 85 company stores and 561 franchise locations.
"In fiscal 2011, Krispy Kreme generated operating income, excluding impairment and lease termination costs, of $19.2 million, which was at the high end of our $17 million to $20 million estimated range. We also posted our first year-over-year growth in revenues since fiscal 2005, and completed our second consecutive year of same-store sales growth at company stores. These factors, among others, led to our first profitable year since fiscal 2004," said James H. Morgan, president and CEO.
FY12 outlook
Morgan added that the company is optimistic about building on this momentum in 2012 and further driving long-term value for its shareholders. In FY12, Krispy Kreme anticipates the opening of five to 10 company stores, five to 15 domestic franchise stores and more than 30 international franchise stores.
Additionally, Morgan said he expects growth in same-store sales at domestic stores and continued improvement in international trends. Commodity costs will remain a concern, and he anticipates various price increases to largely offset these higher input costs.
"Assuming we can mostly offset higher overall costs through pricing and other measures, we estimate fiscal 2012 operating income, exclusive of impairment and lease termination costs, will be in the range of $22 million to $24 million, which would represent an increase of 15 percent to 25 percent from our fiscal 2011 results," Morgan said.
Helping with this objective is a recent supply chain distribution agreement with Sysco Corporation, which will allow Krispy Kreme to benefit from Sysco's buying power and distribution network reach. The deal will also simplify supply chain operations and add capabilities and services for Krispy Kreme franchisees.
