News

Krispy Kreme turns in hot Q2

August 25, 2011

Krispy Kreme Doughnuts Inc. reported second quarter 2012 results Thursday, which included the company's best first half performance in seven years.

Krispy Kreme's net income rose to $8.8 million, compared to $2.2 million in the same quarter of Q2 fiscal 2011. Diluted earnings were 12 cents per share, versus 3 cents per share last year.

Part of this net income gain is attributable to the sale of the company's equity interest in its Mexican franchisee of $4.7 million after tax.

Other highlights include:

• Revenues increased 11.4 percent to $98.0 million from $87.9 million;
• Company same store sales rose 2.5 percent, the 11th consecutive quarterly increase;
• Operating income rose 18.8 percent to $4.9 million from $4.2 million;
• Cash provided by operating activities was $7.6 million compared to $3.7 million in the second quarter last year.

The company ended the quarter with a total of 669 Krispy Kreme stores systemwide, a net increase of 17 shops during the quarter. As of July 31, there were 88 company stores and 581 franchise locations.

President and CEO James H. Morgan noted that the results were particularly impressive because of macro pressures such as higher commodity and gas prices, and hot weather during the quarter, which is not conducive to the doughnut business. Additionally, the second quarter has historically been a weak time of year for Krispy Kreme.

"While we are certainly pleased with these results, more importantly, we are demonstrating the ability to execute on a strategic plan we believe will allow us to substantially increase revenue, improve margins and expand the Krispy Kreme system over coming years," Morgan said.

The fiscal 2012 operating income is predicted to fall between $22 million and $24 million.

"We continue to believe the high end of this range is achievable and look forward to building on our recent momentum as we move toward calendar 2012," Morgan said.

Krispy Kreme's turnaround strategy was implemented after Morgan moved into the CEO role in 2008.

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