Krispy Kreme: Reports Strong Second Quarter 2023 Results

Charlotte / NC. (kkd) Krispy Kreme Doughnuts Inc., since May 2016 indirect member of Luxembourg’s JAB Holding Company, reported financial results for the second quarter ended July 2, 2023. Net revenue grew 9.0 percent year-over-year to USD 408.9 million and organic revenue grew 11.4 percent, led by the U.S., where all sales channels including doughnut and cookie shops, Delivered Fresh Daily («DFD») doors, and ecommerce contributed to 12.7 percent organic growth in the quarter.

GAAP net income for the quarter was USD 0.1 million compared to net loss of USD 2.4 million a year ago while GAAP diluted EPS for the quarter was USD 0.00 compared to diluted loss per share of USD 0.02 last year. Adjusted diluted EPS decreased USD 0.01 to USD 0.07 for the quarter, compared to USD 0.08 last year in the same period, driven by higher net interest expense. Adjusted Ebitda increased 3.1 percent in the quarter to USD 48.8 million led by the U.S. and Market Development segments.

Global Points of Access, which reflect all locations where fresh doughnuts and cookies can be purchased, increased by 462 during the quarter and 1,035 year-to-date, providing consumers with access to Krispy Kreme and Insomnia Cookies through 12,872 locations around the world.

Commenting on the Company’s performance, CEO Mike Tattersfield stated, «I am proud of the results we delivered in the second quarter, which were bolstered by our continued focus on expanding our hub and spoke model as we leaned heavily into our omni-channel and DFD capabilities as well as our international expansion strategy. We executed the strongest and largest National Doughnut Day in our history, which we now celebrate in a dozen countries. We are also pleased with our global expansion, as we opened three new markets during Q2-2023 in Chile, Jamaica, and Costa Rica, all exceeding our revenue growth targets.

«We look forward to capitalizing on a strong start to the year in the back half of 2023 and delivering profitable growth as we focus on our capital efficient hub and spoke model and omni-channel strategy. We continue to expect to open in three to five additional markets in 2023, and recently opened in Switzerland which marked our first opening in Continental Europe to be followed by France before year-end. Overall, we remain on our path to grow Global Points of Access and become the most loved sweet treat brand.»

Financial Highlights versus Q2-2022 respective H1-2022

(USD in millions, except per share data) Q2-2023 Q2-2022 H1-2023 H1-2022
Net Revenue 408.9 USD +9.0 % 827.8 USD +10.7 %
Organic Revenue 406.8 USD +11.4 % 829.3 USD +12.9 %
GAAP Net Income 0.1 USD +103.5 % 1.7 USD (57.3) %
Adjusted Net Income, Diluted 11.4 USD (13.1) % 26.7 USD +1.3 %
GAAP Operating Income 5.6 USD (24.8) % 20.6 USD (17.0) %
GAAP Operating Income Margin 1.4 % -60 bps 2.5 % -80 bps
Adjusted Ebitda 48.8 USD +3.1 % 103.7 USD +7.8 %
Adjusted Ebitda Margin 11.9 % -70 bps 12.5 % -40 bps
GAAP Diluted EPS 0.00 USD +0.02 USD 0.00 USD 0.00 USD
Adjusted Diluted EPS 0.07 USD (0.01) USD 0.16 USD 0.00 USD

Q2-2023 Key Operating Metrics compared to Q2-2022 and Q1-2023

(USD in millions, except access points) Q2-2023 Q2-2022 Q1-2023
Global Points of Access 12,872 units +12.8 % +3.7 %
Sales per Hub (U.S.) TTM 4.7 USD +9.3 % +2.2 %
Sales per Hub (International) TTM 9.7 USD +3.2 % (1.0) %
Ecommerce as a Percent of Retail Sales 18.8 % +130 bps -80 bps

Second Quarter 2023 Consolidated Results

Krispy Kreme’s second quarter 2023 results reflect strong growth compared to the prior year. Net revenue grew 9.0 percent to USD 408.9 million and total company organic revenue grew 11.4 percent in the quarter. Organic revenue growth was driven by a strong performance in all three business segments. Ecommerce revenue growth in the quarter was 18.0 percent and represented 18.8 percent of retail sales in the quarter.

GAAP net income for the quarter was USD 0.1 million, compared to a GAAP net loss of USD 2.4 million in 2022. GAAP net income included a USD 4.4 million charge related to the previously disclosed exit of the Company’s Branded Sweet Treats business that was largely non-cash. Inventory write-offs and employee severance associated with the exit of the Branded Sweet Treats business had a 70 basis point impact on product and distribution costs as a percent of revenue in the second quarter of 2023.

Adjusted Ebitda in the quarter grew 3.1 percent to USD 48.8 million despite an approximate USD 0.5 million negative impact from the stronger U.S. dollar. Operating margins declined 60 basis points to 1.4 percent, while Adjusted Ebitda margins declined 70 basis points to 11.9 percent as pricing initiatives and hub and spoke efficiencies were offset by inflationary pressure and the timing of certain performance-based incentives. Adjusted Net Income, Diluted, decreased 13.1 percent to USD 11.4 million in the quarter. GAAP diluted EPS in the quarter was USD 0.00 compared to a loss per share of USD 0.02 in the same quarter last year, while adjusted diluted EPS decreased 12.5 percent to USD 0.07 from USD 0.08 in the second quarter of 2022, due primarily to higher net interest expense.

Second Quarter 2023 Market Segment Results

U.S.: In the U.S. segment, net revenue grew USD 22.8 million, or approximately 9.3 percent, and organic revenue increased USD 29.8 million, or approximately 12.7 percent, compared to a year ago. Organic growth was driven by successful pricing actions, marketing activations and expansion of our DFD strategy. Sales per hub in the U.S. increased 9 percent to USD 4.7 million and DFD average sales per door increased 16 percent year over year to USD 632 per week, with an additional 815 Points of Access compared to the second quarter of fiscal 2022. Additionally, ecommerce as a percent of retail sales grew 260 basis points. This level of performance was achieved despite short-term disruption from a third-party POS provider during the first part of the quarter, which has since been resolved. We also saw strong performance at Insomnia Cookies which opened 23 new Cookie Shops compared to the second quarter of fiscal 2022.

U.S. Adjusted Ebitda increased 16.3 percent to USD 28.1 million with Adjusted Ebitda margin expansion of 60 basis points to 10.5 percent. This was primarily driven by efficiencies from network optimizations and price increases augmenting Sales per Hub, partially offset by inflation and labor inefficiencies due to the temporary outages associated with a third-party POS provider. Profitability at Insomnia Cookies was pressured because of the impact of higher product and distribution costs, partially offset by pricing, as well as timing of investments to support strategic growth initiatives.

International: In the International segment, net revenue grew USD 4.5 million, or approximately 4.8 percent, from the second quarter of fiscal 2022 to the second quarter of fiscal 2023, aided by foreign currency translation impacts of USD 1.2 million from a weakening U.S. dollar. International organic revenue grew USD 3.3 million, or approximately 3.5 percent, from the second quarter of fiscal 2022 to the second quarter of fiscal 2023, driven by increased pricing and Points of Access growth of 245 locations, or 7 percent, compared to the second quarter of fiscal 2022.

International Adjusted Ebitda declined 0.4 percent compared to the prior year at USD 19.5 million, driven by cost inflation. Adjusted Ebitda margins declined 100 basis points to 19.8 percent. We have already begun to see results from the actions taken in the International segment, focused on expansion with key partners including adding Krispy Kreme to consumer loyalty card programs, deploying pricing and cost control initiatives, and optimizing price pack architecture in the UK DFD market.

Market Development: In the Market Development segment, net revenue increased USD 6.4 million, or approximately 17.4 percent, from the second quarter of fiscal 2022 to the second quarter of fiscal 2023, despite the impacts of certain foreign currencies devaluing against the U.S. dollar. When adjusted for the impacts of acquisitions and foreign currency, Market Development organic revenue grew USD 8.5 million, or approximately 23.2 percent, from the second quarter of fiscal 2022 to the second quarter of fiscal 2023, driven by strong performance in the Company’s international franchise markets, Canada, and Japan, aided by Hub and Spoke model expansion.

Market Development Adjusted Ebitda grew 27.3 percent to USD 15.7 million, with strong margin improvement in the Company’s equity-owned Japan and Canada markets from hub and spoke efficiencies and strength in international franchise revenue more than offsetting inflation and the strong U.S. dollar. Adjusted Ebitda margins for the segment increased 290 basis points to 36.5 percent despite a negative impact from mix shift.

Balance Sheet + Capital Expenditures

During the second quarter of 2023, the company invested USD 27.7 million in capital expenditures, or 6.8 percent of revenue, primarily to support growth of our hot light theaters, cookie shops, and DFD Doors.

As of July 02, 2023 the company had total available liquidity of USD 201.6 million, including USD 26.6 million of cash and cash equivalents plus undrawn capacity of USD 175 million under available credit facilities, and net debt of USD 833.5 million. In line with the strategic decision to reduce reliance on vendor financing programs, the Company paid down a further USD 33.7 million in structured payables and supply chain financing vehicles in the second quarter which will provide a long-term tailwind to Adjusted Ebitda.

2023 Financial Outlook

Krispy Kreme re-affirms its previous guidance for the full year 2023 as follows:

  • Net Revenue of USD 1.65 billion to USD 1.68 billion, +8 percent to +10 percent vs 2022 (+9 percent to +11 percent in constant currency)
  • Organic Revenue growth of 9 percent to 11 percent
  • Adjusted Ebitda of USD 205 million to USD 215 million, +8 percent to +13 percent vs 2022 (+10 percent to +14 percent in constant currency)
  • Adjusted Net Income, Diluted, of USD 52 million to USD 58 million, +5 percent to +17 percent vs 2022 (+9 percent to +21 percent in constant currency)
  • Adjusted Diluted EPS of USD 0.31 to USD 0.34, +7 percent to +17 percent vs 2022 (+10 percent to +21 percent in constant currency)
  • Income Tax rate between 24.5 percent to 26.0 percent
  • Capital Expenditures between USD 105 million to USD 115 million, or approximately 6.6 percent of revenue
  • Interest Expense, net between USD 39 million to USD 43 million

The above guidance continues to assume a negative 1 percent impact to 2023 revenue and a negative USD 3 million impact to 2023 Adjusted Ebitda from FX headwinds, with the impact entirely in the first half of the year. The Company expects to reduce its net leverage in 2023, as we make progress towards our 2026 goal of approximately 2.0x to 2.5x net leverage.


The following definitions apply to terms used throughout this statement:

  • Global Points of Access: Reflects all locations at which fresh doughnuts or cookies can be purchased. We define global points of access to include all Hot Light Theater Shops, Fresh Shops, Carts and Food Trucks, DFD Doors and Cookie Shops, at both Company-owned and franchise locations as of the end of the respective reporting period. We monitor global points of access as a metric that informs the growth of our omni-channel presence over time and believe this metric is useful to investors to understand our footprint in each of our segments.
  • Hubs: Reflects locations where fresh doughnuts are produced and processed for sale at any point of access. We define Hubs to include self-sustaining Hot Light Theater Shops and Doughnut Factories, at both Company-owned and franchise locations as of the end of the respective reporting period.
  • Sales Per Hub: Sales per Hub equals Fresh Revenues from Hubs with Spokes, divided by the average number of Hubs with Spokes at the end of the five most recent quarters.
  • Fresh Revenues from Hubs with Spokes: Fresh Revenues include product sales generated from our Doughnut Shop business (including Ecommerce and delivery), as well as DFD sales, but excluding sales from our legacy wholesale business and our Branded Sweet Treat Line. It also excludes all Insomnia Cookies revenues as the measure is focused on the Krispy Kreme business. Fresh Revenues from Hubs with Spokes equals the Fresh Revenues derived from those Hubs currently producing product for other shops, Carts and Food Trucks, and/or DFD Doors, but excluding Fresh Revenues derived from those Hubs not currently producing product for other shops, Carts and Food Trucks, and/or DFD Doors.
  • Total Net Leverage Ratio: Calculated using Net Debt (including both bank debt and financing leases as part of debt) divided by Adjusted Ebitda.
  • Free Cash Flow: Defined as cash provided by operating activities less purchases of property and equipment.