Krispy Kreme jumps 11%; sweet rewards ahead for investors?

Posted: 22 February 2022 8:33 pm
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The company posted its first quarterly profit since going public last year. Here’s what investors can expect going forward.

Shares of Krispy Kreme (DNUT) climbed as much as 11% Tuesday after the North Carolina-based donut maker reported its first quarterly profit since going public last July.
Krispy Kreme’s favorable results might offer some reward to investors, who’ve faced a rocky start since the company went public. The stock’s down 8.65% from its first trading day price, and down 23.84% from its December high.

By the numbers

Krispy Kreme reported fourth quarter 2021 revenue of $371 million, up 13.8% year over year and topping analyst estimates of $363 million. Fourth-quarter net income was $4.3 million, or $0.01 per share. A year ago, Krispy Kreme reported a fourth-quarter net loss of $24.8 million, or $0.21 per share. But the company’s earnings fell slightly short of Wall Street estimates. Adjusted earnings for the quarter came in at $0.08 per share, down 20% from the same quarter last year and missing Wall Street estimates of $0.10.

So what does it say about the future?

Krispy Kreme saw strong performance across all three of its segments. Its Global Points of Access segment, which represents all locations where customers can purchase fresh doughnuts and cookies, grew 25% year over year. Its US and Canada Sales per Hub and International Sales per Hub segments grew 14.3% and 42.2%, respectively.
E-commerce sales also grew as a percentage of retail sales and now represent a “a core pillar” of Krispy Kreme’s omnichannel strategy. Rob Ballew, Krispy Kreme’s VP of investor relations and corporate communications, said Tuesday during the company’s earnings call that 17% of the company’s retail sales came from e-commerce, up from less than 10% before the pandemic.
Although operating expenses likely weighed on profits, rising 14.5% from the same quarter last year to $167.5 million, as labor and commodity costs continue to bog down food retailers, the company was able to offset these costs through price increases.
Krispy Kreme raised prices twice in 2021 and still managed to grow sales.
“Looking ahead, we are well-positioned to deliver another year of double-digit revenue growth in 2022,” Krispy Kreme CEO Mike Tattersfield said in a statement. “Our performance will be led by the expansion of our omni-channel model, as we continue to significantly expand our points of access.”
For 2022, Krispy Kreme expects net revenue growth of 11% to 13%, in line with Wall Street’s expectations. But its forecast of $0.38 to $0.41 in earnings per share falls short of analysts’ expectations of $0.46 per share.
Still, analysts remain largely bullish on the stock. Of the 10 analysts covering Krispy Kreme stock, six give it either a Strong Buy or Buy, versus three Holds, one Underperform and no Sells of any kind.
With its first profitable quarter in the books, investors will be hungry for more.

Krispy Kreme among other IPOs that have had a rough start

Several of last year’s high profile IPOs have had rough starts. Ford and Amazon-backed electric vehicle (EV) maker Rivian (RIVN) joined the Nasdaq in November in the largest IPOs of the year. A week following its market debut, Rivian soared to $179.47, giving it a $140 billion market cap and making it more valuable than Ford (F) and General Motors (GM). The stock is now down 65.24% from this previous high.
Likewise, Lucid Motors (LDIC), which went public via a SPAC deal last year, has lost more than half its value since hitting a high of $57.75 in November. The EV startup went public in July after merging with Churchill Capital Corp IV. In a December filing, Lucid Motors announced it was under investigation by the SEC, which likely contributed to the stock’s decline. Last year was a record year for IPOs, but many are fighting to recapture their initial highs. It’s been slower this year, as no one seemingly wants to launch into this rough market.
At the time of publication, Matt Miczulski owned shares of GM and LCID.

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