Krispy Kreme relying on ‘relentless focus’ to unlock earnings and sales gains

by Eric Schroeder
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WINSTON-SALEM, N.C. — Despite a “tepid” consumer spending environment, Krispy Kreme Doughnuts, Inc. increased its top line at a “healthy pace,” said James H. Morgan, chairman, president and chief executive officer.

Net income at the Winston-Salem-based company increased 34% in the third quarter ended Nov. 3 to $6,780,000, equal to 10c per share on the common stock, up from $5,044,000, or 8c per share, in the same period a year ago. Net revenues rose 7% to $114,231,000 from $107,087,000. Same-store sales at company stores rose 3.7%, the 20th consecutive quarterly increase, driven primarily by retail price increases.

“Our relentless focus on executing our long-term strategic plan is enabling us to strengthen our company, gradually unlock our brand’s full potential and create value for our shareholders,” Mr. Morgan said. “During the third quarter, we extended our track record of positive same-store sales at company stores to 20 consecutive quarters. We believe this is a remarkable distinction. We are pleased to have increased our top line at a healthy pace despite the tepid consumer spending environment. Most importantly, we demonstrated the attractive leverage opportunities inherent within our business model as evidenced by achieving a higher rate of growth in operating income and adjusted e.p.s. than in revenues.”

Mr. Morgan said the strong third-quarter performance led the company to raise the lower end of its expected range of adjusted e.p.s. for fiscal 2014 to a new range of 60c to 63c, up from 59c to 63c.

“If achieved, this would represent growth of from 28% to 34% compared to last year on a 52-week basis,” he said, adding the company has set preliminary expectation of adjusted e.p.s. for fiscal 2015 in the range of 71c to 76c per share.

Mr. Morgan identified several areas through which Krispy Kreme is well equipped to optimize returns, including deploying capital on company store development, supporting domestic and international franchise growth, and repurchasing outstanding shares.

“We believe these attributes both set us apart and provide Krispy Kreme with a uniquely bright long-term future,” he said. “We will continue working hard every day for the benefit of our franchisees, our customers and guests, and our shareholders.”

For the nine months ended Nov. 3, net income was $19,496,000, or 29c per share, up 22% from $15,999,000, or 24c per share, in the same period a year ago. Revenues totaled $347,585,000, up 9% from $317,698,000.
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