Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Krispy Kreme Inc (DNUT, Financial) successfully launched its nationwide rollout with McDonald's, starting in Chicago and expanding to Ohio and Indiana, aiming for nearly 2000 McDonald's locations by the end of 2024.
- The company plans to expand its points of access from 16,000 to 35,000 across 50 countries within three years, indicating significant growth potential.
- Krispy Kreme Inc (DNUT) reported 15% growth in both delivered fresh daily and digital sales, showcasing strong consumer demand and digital engagement.
- The company is restructuring its management to focus on profitable expansion in the US and adopting a capital-light franchise model internationally, which could enhance operational efficiency.
- Krispy Kreme Inc (DNUT) is modernizing its doughnut production and increasing distribution density to improve profitability, with successful examples like the Elk Grove facility in Chicago increasing production threefold.
Negative Points
- Adjusted EBITDA declined by 20.7% due to the sale of a majority stake in Insomnia Cookies and underperformance in the UK, impacting overall profitability.
- The company faced incremental vehicle accident claims in the US, resulting in nearly $3 million in additional expenses for the quarter.
- Krispy Kreme Inc (DNUT) experienced a decline in adjusted EBITDA margin to 9.1%, partly due to seasonal low volumes affecting cost absorption and margin.
- The UK market underperformed, with a new management team being introduced to address challenges, indicating ongoing issues in this region.
- Logistics costs were higher than expected, and the company is investing ahead of revenue in its US expansion, which may pressure margins in the short term.
Q & A Highlights
Q: With the McDonald's rollout, have revenue per door metrics been consistent, and what are the early observations?
A: Joshua Charlesworth, CEO: The response has been positive and aligns with our original assumptions. We're seeing incrementality in Chicago without impacting existing doughnut shops. The rollout is smooth, and McDonald's support is strong, which boosts our confidence to accelerate the expansion.
Q: Regarding the international segment, particularly the UK, what's the confidence level in getting it back on track?
A: Joshua Charlesworth, CEO: We're focusing capital on US growth and deploying a capital-light franchise model internationally. In the UK, a new management team is addressing challenges, focusing on core menu changes and value perception. The strategy doesn't require capital but rather strategic adjustments.
Q: As you expand DFD partnerships with major retailers, will less efficient locations close?
A: Joshua Charlesworth, CEO: Partnering with high-quality national players like McDonald's and Costco allows us to optimize distribution. Profitability is about route density and efficient delivery. We aim to prioritize growth opportunities while optimizing routes for efficiency.
Q: Can you provide an update on the US expansion, particularly the construction of new hubs?
A: Joshua Charlesworth, CEO: Progress is good, with three hubs under construction and ten signed contracts. We're identifying strategic locations for efficient distribution and leveraging existing buildings for better returns. The expansion is on track to meet accelerated growth targets.
Q: Regarding McDonald's, is there any data on attach rates or retail demand?
A: Joshua Charlesworth, CEO: We see a positive consumer response and good sales throughout the day. While McDonald's doesn't share all consumer data, feedback indicates strong demand, aligning with our projections.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
