Krispy Kreme income up sharply

by Eric Schroeder
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WINSTON-SALEM, N.C. — Krispy Kreme Doughnuts, Inc. completed a successful fiscal 2011 behind a strong fourth quarter, as net income in the quarter ended Jan. 29 soared to $143,542,000, equal to $2.06 per share on the common stock, up from a loss of $1,466,000 in the same period a year ago. For the full fiscal year, net income was $166,269,000, or $2.40 per share, up sharply from $7,599,000, or 11c per share, in fiscal 2010.
Both the fourth-quarter and full-year results included a non-recurring credit of $139.6 million from the reversal of valuation allowances on deferred income tax assets. Krispy Kreme said the reversal is expected to have the effect of reducing the company’s earnings in subsequent years as a result of an increase in the provision for income taxes in future periods.

Adjusted net income for the fourth quarter totaled $3,980,000, or 6c per share, up from a loss of $1,471,000 in the same period a year ago. Meanwhile, adjusted full-year income rose 195% to $22,160,000, or 32c per share.

Revenues for the fourth quarter and full year rose 11% to $101,957,000 and $403,217,000, respectively.

“The fourth quarter capped off an extremely successful year at Krispy Kreme, and we were pleased to have generated double-digit revenue growth with substantial increases in both operating income and e.p.s.,” said James H. Morgan, chairman and chief executive officer. “As pleased as we were with these results, however, we are committed to converting even more of our revenue growth into bottom-line profitability. To that end, we will continue to strengthen our core donut line through innovative limited-time offerings, complemented by an already successful coffee launch and a broader beverage program to follow. We will also build on the recent introduction of our new wholesale product offerings and continue to work on cost reductions in labor, ingredients and the store model itself.

“In terms of development, our system is nearly 700 stores today, and we are confident in our plan to expand company store development strategically, while growing our franchise system significantly, both domestically and internationally. We believe that Krispy Kreme has an extraordinary market opportunity, and as we look to the coming fiscal year, we are very confident that we can execute against our plan and continue to drive value for shareholders.”

Krispy Kreme said it plans to open 5 to 10 company stores, 10 to 15 domestic franchise stores, and approximately 75 international franchise stores during fiscal 2013. The company said it expects fiscal 2013 operating income in the range of $29 million to $33 million.

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