News

Operations, marketing lead to strong sales at Krispy Kreme

May 31, 2013

Krispy Kreme's first quarter was impressive — an 11.4 percent same-store sales increase at company stores, 11 percent revenue growth, a 33 percent profit jump, etc.

During the company's Q1 earnings call Thursday, CEO Jim Morgan attributed the performance to higher traffic counts, brand differentiation and successful occasions.

Morgan said the company plans to continue growing sales and profits in five ways:

1. Promoting new doughnut-use occasions throughout the day and night.
2. "We seek to own the doughnut category by maximizing dozens and innovating with limited time offers, as well as adding new flavors and shapes," Morgan said.
3. Continued expansion of the beverage program with a goal of significantly increasing the percentage of transactions that include a beverage purchase. Total beverage units are about 5 percent higher than they were a year ago. Sales were up closer to 16 percent, Morgan said. "A portion of that reflects the fact that the lattes and some of the higher-priced coffee derivative drinks were picking up pace there," he said.
4. Leveraging the brand's strength in social media and local store marketing to increase top-of-mind awareness.
5. Further enhancing the guest experience.

"We spent the better part of the last 5 years building the foundation that would facilitate that success, and I think that foundation sort of raised the bar on ourselves and I think we just got a different beginning point," Morgan said.

Smaller footprint

Additionally, Krispy Kreme is also growing is smaller, freestanding factory prototype that features the same doughnut production capabilities as traditional stores. There are now three new freestanding small factory stores and the company anticipates opening seven or eight more before the end of the year.

"While it is still early in the process, we are optimistic that we can achieve at least a 20 percent cash-on-cash return with average weekly sales in the $20,000 area, a sales number significantly less than our current average for freestanding retail-only factory shops," Morgan said.

Other growth objectives include having more than 400 domestic shops open by January 2017, and having 900 international shops in operation by the end of January 2017, both in existing markets and new markets such as Taiwan and Moscow.

Read more about operations management.