Krispy Kreme’s financial health has made steady progress, says Professor Mike Lord

12.1.2011 Article, Faculty News, Retail

Krispy Kreme's third-quarter financial results show growth
Reposted from Winston-Salem Journal| By Fran Daniel

Krispy Kreme Doughnuts Inc.'s net income nearly doubled in its third quarter of fiscal 2012.

Krispy Kreme's net income was $4.7 million, or 7 cents a diluted share, compared with $2.4 million, or 3 cents a diluted share.

Revenues increased 9.4 percent to $98.7 million for the third quarter, compared with $90.2 million for the same quarter a year ago.

"Our third-quarter performance reflects continued progress in strengthening our financial condition and realizing our vision for the Krispy Kreme brand," said James H. Morgan, Krispy Kreme's chief executive.

"We generated a healthy increase in revenues, recorded our twelfth consecutive quarter of positive same-store sales at company stores and delivered substantial improvements in both profitability and operating cash flow," Morgan said.

Krispy Kreme also raised its outlook for fiscal 2012. The company now expects that its consolidated operating income, excluding impairment charges and lease-termination costs, will be $24 million to $26 million. This would be a 25 percent growth over fiscal 2011.

Michael Lord, an associate professor of strategy and entrepreneurship at Wake Forest University, called Krispy Kreme's third-quarter results pretty good on most metrics.

"Both company stores and franchised stores seem to have posted some solid performance numbers," Lord said. "Operating cash flows look better, debt costs are down and profits are up. These all are good signs."

He said the company's store growth and price increases have helped to offset the weak economy and higher input costs.

"These results are in line with Krispy Kreme's continuing progress over many quarters," Lord said. "There have been a few bumps here and there, but in general it's been good and steady progress. The markets have recognized and rewarded this."

The company also said Wednesday that it has signed an agreement for additional expansion in Japan with its Japanese franchisee, Krispy Kreme Doughnut Japan Co. Ltd.

The franchisee will build 19 more locations over the next five years in the Kyushu and Chugoku regions of Japan. The company recently announced the development of 73 new locations in the Kanto, Kansai and Chubu regions of the country.