STRATEGIC PARTNERS
December 1, 2010
Krispy Kreme Doughnuts Inc.’s revenues increased 7.9 percent for the third quarter 2011, ended October 31.
That wasn’t the only good news for the company, which was predicted to fail less than two years ago. Third quarter revenues were up 9.6 percent and company same-store sales rose 5 percent.
This is the eighth consecutive quarterly increase for Krispy Kreme, which experienced a net loss at this time last year. The third quarter ended with a total of 649 Krispy Kreme stores systemwide, which is a net increase of 16 units from Q2. Eight-five of those are company-owned, and 564 are franchise locations.
The numbers surpassed projections put into place last year. The company predicted FY11’s operating income to be between $13 million and $17 million. At the current pace, the FY11 outlook is between $17 million and $20 million.
"We delivered a strong performance in the third quarter, characterized by revenue growth, a significant increase in consolidated operating income, and a positive bottom line for the fourth consecutive quarter,” said Jim Morgan, Krispy Kreme’s president and CEO.
He attributed the numbers to higher sales by company and franchise shops, which drove profits in the supply chain. Also, the international segment exceeded the company’s expectations.
Moving forward, Krispy Kreme anticipates opening five to 10 new company stores in FY12, between five and 15 domestic franchise stores, and more than 30 international franchise stores.
“We expect continued organic same-store sales growth in our domestic stores, but believe international franchise same-store sales will continue to be pressured by the substantial growth in international markets in recent years,” Morgan said.
Any uncertainty within the next fiscal year is anticipated to come from significant increases in commodity costs. Morgan said Krispy Kreme is hoping to remedy this issue by reducing the consumption of certain key ingredients and evaluating the timing and scope of price increases needed to offset these higher costs.
“Although our planning and budgeting process for fiscal 2012 is ongoing, based on these general themes, we currently estimate that fiscal 2012 operating income, exclusive of impairment and lease termination costs, will be in the range of $22 million to $24 million,” Morgan said. “This range represents an increase of 29 percent to 41 percent from the low end of our revised fiscal year 2011 guidance, and an increase of 10 percent to 20 percent from the top end of the fiscal 2011 range.”
