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Krispy Kreme Earnings: Turnaround Plan Unfolds Amid McDonald’s Exit, Margin

  • Writer: Hardik Shah
    Hardik Shah
  • Aug 7
  • 3 min read
Krispy Kreme Turnaround Plan
Source: Krispy Kreme Investor Presentation

TLDR


🔻 Revenue Strength: Net revenue declined 13.5% YoY to $379.8M, mainly due to the Insomnia Cookies divestiture and U.S. softness.

📉 Margin Trends: Adjusted EBITDA dropped 63% YoY to $20.1M, impacted by the McDonald’s partnership exit and impairments.

🔁 Forward Outlook: A four-pronged turnaround plan aims to reduce debt, expand margins, and drive sustainable growth via refranchising and operational resets.


Business Overview


Krispy Kreme, Inc. (NASDAQ: DNUT) is a globally recognized sweet treat brand operating in 40+ countries. Its omnichannel model includes:

  • Doughnut Shops: Hot Light Theater and Fresh Shops

  • Delivered Fresh Daily (DFD) Network: Partnered doors in retailers like Walmart, Costco, and Sam’s Club

  • Digital Sales: Now exceeding 20% of U.S. retail sales

  • Franchise Partnerships: Growing in markets like UAE, France, and Brazil


Krispy Kreme Earnings (Q2'25 vs. Q2'24)


Revenue:

  • Reported: $379.8M (↓13.5%)

  • Organic Revenue: ↓0.8% YoY

  • U.S. Organic Revenue: ↓3.1%, driven by McDonald’s exit and reduced discounting

  • International Organic Revenue: +5.9% led by Canada, Mexico, Japan


Margins & Profitability:

  • Adjusted EBITDA: $20.1M (↓63%)

  • Adjusted EBITDA Margin: 5.3% (↓720 bps)

  • GAAP Net Loss: $441.1M (vs. $4.9M loss YoY), including $406.9M in non-cash impairments

  • Adjusted Net Loss (Diluted): $25.3M or ($0.15)/share

“While the past several quarters have been challenging, we are executing a comprehensive turnaround plan to position the business for long-term success.” – CEO Josh Charlesworth

Forward Guidance


  • CEO expects profitability to improve in Q3, supported by cost reduction and higher-margin DFD doors.

  • FY25 guidance was not reiterated, but management reiterated their focus on positive free cash flow in H2.


Risks & Opportunities

  • Risks: Consumer softness, inflation, DFD route profitability, and high leverage.

  • Opportunities: Third-party logistics outsourcing, new Costco/Sam’s Club pilots, international refranchising.


Operational Performance


  • Exited ~2,400 McDonald’s USA doors and identified 1,500 underperforming U.S. DFD doors (half already closed)

  • Adding 1,100 high-volume DFD doors in 2025

  • Transitioned 40% of U.S. delivery to third-party logistics

  • 15% reduction in G&A headcount

  • Reduced U.S. capex in favor of leveraging excess capacity

“This shift improves overall route profitability and operational efficiency... We expect it to be immediately accretive to EBITDA margin.” – CEO Josh Charlesworth

Market Insights


  • Retailer Partnerships Expanding:Krispy Kreme added 400+ doors with Costco, Walmart, Target, Kroger, and piloted with Sam’s Club.

  • Digital Acceleration:Digital accounted for 20%+ of U.S. retail sales in Q2.

  • Category Caution:Volume decline tied to consumer softness and planned reduced discounting.


Consumer Behavior & Sentiment


  • Marketing focused on Original Glazed Doughnuts—the most profitable item.

  • New campaign kicked off on National Doughnut Day, driving sales uplift.

  • Strategy: shift back to core product, better demand planning, and stronger ops leadership.

“Early results are encouraging with the campaign driving incremental sales and renewed excitement around our signature core offering.” – CEO Josh Charlesworth

Strategic Initiatives


Turnaround Plan:

  1. Refranchising: Actively pursuing 1–2 deals in 2025; in progress for Japan, Mexico, UK, Australia.

  2. ROIC Improvement: Focused on capital-light growth via franchisee development.

  3. Margin Expansion: Operational efficiency, outsourcing logistics.

  4. Quality Growth: Profitable U.S. expansion through DFD and digital.


Capital Allocation


  • Dividends: Halted to conserve capital.

  • Buybacks: None reported.

  • Debt: $889.4M in long-term debt; leverage ratio 7.5x (adjusted EBITDA impacted by one-offs).

  • Liquidity: $243.8M available ($21.3M cash + $222.5M revolver capacity).

  • Asset Sales: Insomnia Cookies exit delivered $75M in proceeds to reduce debt.


The Bottom Line


Krispy Kreme is navigating a critical inflection point, moving decisively to shift toward a leaner, more profitable operating model. The pivot away from capital-heavy U.S. expansion and the McDonald’s partnership marks a return to core brand strength and margin-driven growth.

Investor Watch Points:

  • H2 adjusted EBITDA and free cash flow execution

  • Progress on refranchising deals

  • Sales growth from Walmart/Sam’s Club/Costco DFD expansion

  • Consumer response to Original Glazed-focused marketing



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