Krispy Kreme Earnings: Turnaround Gains Traction with Profitability Push
- Hardik Shah
- 5 hours ago
- 3 min read
TL;DR
Revenue Strength: Organic sales rose 0.6% to $375.3M, lifted by international markets despite U.S. door rationalization.
Margin Trends: Adjusted EBITDA jumped 17% to $40.6M, doubling sequentially as cost cuts and logistics outsourcing took hold.
Forward Outlook: Management expects sequential EBITDA growth in Q4, positive free cash flow, and continued debt reduction as refranchising accelerates.
Business Overview
Krispy Kreme, Inc. (NASDAQ: DNUT) is a global sweet treat brand operating in over 40 countries through its hub-and-spoke model, which delivers fresh doughnuts daily to both company-owned and partner retail points (“Points of Access”). The company’s growth now leans on capital-light franchising and partnerships with leading retailers such as Walmart, Target, Costco, and Sam’s Club, alongside a fast-growing digital channel that now accounts for over 20% of U.S. retail sales.
Krispy Kreme Earnings
Krispy Kreme’s third quarter of fiscal 2025 reflected early traction from its turnaround efforts:
Net Revenue: $375.3M (down 1.2% YoY) due to the 2024 Insomnia Cookies divestiture.
Organic Revenue: +0.6%, driven by strong international markets (Japan, Mexico, Canada).
GAAP Net Loss: $(20.1)M vs. $37.6M profit last year (which included a one-time Insomnia gain).
Adjusted EBITDA: $40.6M (+17% YoY, doubling QoQ) with margins expanding 170 bps to 10.8%.
Free Cash Flow: $15.5M, signaling early improvement in liquidity and working capital discipline.
Leverage: Net leverage ratio improved to 7.3x from 7.5x last quarter.
Forward Guidance
CEO Josh Charlesworth expects continued progress in Q4 and 2026, emphasizing higher EBITDA, sustained free cash flow, and accelerated debt paydown.Risks &
Opportunities: Continued consumer softness in the U.S. could weigh on volumes, though margin initiatives, franchising, and international expansion provide upside.
“Looking ahead to the remainder of 2025 and beyond, we expect further improvement in adjusted EBITDA and positive free cash flow,” said CEO Josh Charlesworth.
Operational Performance
Execution on the four-part turnaround plan is showing tangible results:
Refranchising – Progress on deals to refranchise certain international markets and restructure the WKS joint venture, which covers 15% of U.S. revenues.
Return on Invested Capital – CapEx cut below 2024 levels, with 2026 investment expected to decline further.
Margin Expansion – Logistics outsourcing now covers 54% of the U.S. network, improving cost predictability.
Sustainable Growth – Optimization of door portfolio led to an 18% increase in average weekly sales per door following exits from underperforming locations.
Market Insights
International markets—especially Japan, Mexico, and Canada—continue to outperform, underscoring Krispy Kreme’s global brand strength and franchise momentum. In contrast, the U.S. is focused on profitability over scale, with management noting that rationalization is complete and expansion is now concentrated on high-volume partners like Walmart and Costco.
“We intentionally exited from McDonald’s and 600 poorer performing doors… but that contributed to a small revenue decline and a significant improvement in EBITDA,” said Charlesworth.
Consumer Behavior & Sentiment
Krispy Kreme’s limited-time collections and refreshed core menu continue to drive engagement:
Digital Sales: Up 17% YoY, now 20%+ of U.S. retail sales.
Product Mix: Continued strength in Original Glazed®, supported by cultural tie-ins like Harry Potter, Passport to Italy, and Crocs collaborations.
Menu Refresh: Newly reintroduced fan-favorite flavors (e.g., Oreo Cookies & Cream, Biscoff Cookie Butter) reflect responsiveness to consumer demand.
Strategic Initiatives
Krispy Kreme’s transformation plan focuses on deleveraging, franchising, and efficiency gains:
Refranchising to reduce ownership in capital-heavy markets and improve financial flexibility.
International Expansion with franchise openings in Spain, Uzbekistan, and Brazil, leveraging the proven hub-and-spoke model.
Logistics Outsourcing aiming for 100% U.S. coverage by 2026, expected to provide long-term cost tailwinds.
Digital Growth and menu innovation as dual levers for sustainable brand engagement.
Capital Allocation
The company reported $215M in liquidity, including $31M cash and $185M in available credit facilities. Year-to-date CapEx totaled $80.8M (7.2% of revenue)—well below 2024 levels—mainly directed toward high-return projects like the Minneapolis Hot Light Theater Shop.
CFO Rafael Duvivier reaffirmed: “We remain focused on deleveraging the balance sheet and evolving Krispy Kreme to a more capital-light franchise model”.
The Bottom Line
Krispy Kreme’s third quarter marks credible progress in its turnaround journey—profitability is improving, debt is easing, and operational discipline is taking root.
Investors should watch:
Execution of U.S. logistics outsourcing and margin sustainability.
Refranchising milestones and debt reduction pace.
Consumer traction from new menu launches and digital engagement.
If execution holds, Krispy Kreme’s strategy to become a leaner, franchise-driven, high-margin brand could reaccelerate earnings momentum into 2026.
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