CHARLOTTE, NC. — International expansion will play a pivotal role in Krispy Kreme, Inc.’s goal to grow its points of access globally to 75,000.
“Interest from high-quality franchise partners remains robust, and we are confident in our ability to sign three to five new countries a year moving forward,” said Michael J. Tattersfield, chief executive officer, in a Feb. 15 earnings call to discuss fiscal-year results. “We expect to open five to seven new countries in 2023, including in France, bringing our total to more than 35 countries by the end of this year.
“As we look ahead, our relentless focus on capital-light expansion of our omnichannel model will continue. We continue to gain confidence in our existing DFD (delivered-fresh-daily) channels and are now excited in growing our fresh business to new channels such as QSR, club and drug. That’s why we have high conviction in our ability to grow to more than 75,000 points of access globally, an increase from our prior target of 50,000.”
Krispy Kreme could point to 11,837 global points of access at the end of the fiscal year ended Jan. 1, which was up 14% from 10,427 at the end of the previous fiscal year.
A net loss attributable to Krispy Kreme, Inc. was $16 million in the fiscal year, which compared with a loss of $25 million in the previous fiscal year. Expenses related to optimization efforts were $19 million. Net revenue increased 11% to $1.53 billion from $1.38 billion. Organic revenue grew 12%.
Krispy Kreme’s stock price on the Nasdaq closed at $13.07 per share Feb. 15, which was up 7% from a Feb. 14 close of $12.24 per share.
Internationally, net revenue increased 10% to $366 million from $333 million in the previous fiscal year. Organic revenue jumped 18%.
“What I’m pretty pleased about is that you’ll see last year, we were getting into the Middle East and even the African continent,” Mr. Tattersfield said. “Now this year, we’ll be opening up in South America, Central America, the Caribbean as well, right?”
Net revenue in the United States and Canada increased 11% to $1.03 billion from $928 million. Organic revenue grew 9%.
Executives of Charlotte-based Krispy Kreme in the 2023 fiscal year expect net revenue of $1.65 billion to $1.68 billion, which would be an increase of 8% to 10%. Organic revenue growth is expected to be in a range of 9% to 11%.
“From a cost-of-goods-sold perspective, we are more than 90% covered on our major commodities such as sugar, wheat and edible oils for 2023 at an average increase in the high single digits,” said Jeremiah Ashukian, chief financial officer. “These commodities make up roughly half of our spend. On our remaining spend, we have contracted pricing in place and expect low double-digit inflation. Both of these are lower than we experienced in 2022. Inflation on our largest expense, labor, is expected to remain elevated in the mid- to high single digits as we continue to invest in our Krispy Kremers across the globe.”
In the fourth quarter, a loss of $2.7 million compared with net income of $1.4 million, or 1¢ per share on the common stock, in the previous year’s fourth quarter. Net revenue increased 9% to $405 million from $371 million.
“We saw low levels of elasticity from the pricing actions we took in the second half of 2022 with consumers domestically and globally remaining enthusiastic about premium specialty donuts for their sharing occasions and celebratory events,” said Joshua Charlesworth, chief operating officer. “We saw a small GAAP net loss of $1 million in the fourth quarter. However, net income would have increased over the prior year if not for one-time, overwhelmingly non-cash expenses of $12.4 million related to our previously announced optimization of our poorer performing hubs without spokes in the US. We do not expect significant expense moving forward related to these efforts.”
The Insomnia Cookies brand, which is owned by Krispy Kreme, in the fourth quarter experienced 24% revenue growth, Mr. Tattersfield said.“We are focused on accelerating Insomnia’s growth as we grow from our current 231 shops today to a total addressable market we believe of more than 4,000 locations with the goal to eventually ramp up to nearly 100 new cookie shops per year,” Mr. Tattersfield said. “We truly believe Insomnia Cookies will be the next Krispy Kreme, and we plan to expand globally this year into the UK and Canada.”