Why Krispy Kreme Stock Crushed It Today
Key Points
Krispy Kreme's turnaround strategy is working.
A new asset-light business model could be the key to the company's success.
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Shares of Krispy Kreme (NASDAQ:DNUT) surged more than 30% on Thursday after the doughnut maker boosted its full-year sales forecast.
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Strengthening profitability
Krispy Kreme's net revenue declined 12.4% year over year to $328.8 million in its fiscal third quarter, which ended on Sept. 27.
The decline reflects the doughnut shop operator's shift toward a less capital-intensive, franchise-based business model. Roughly a quarter of the chain's systemwide sales -- the total dollar value of all Krispy Kreme product sales -- came from franchise-operated stores in fiscal 2025. That figure rose to 42% in the third quarter.
Management is targeting 50% of systemwide sales generated by franchisees by fiscal 2027. Third-quarter systemwide sales increased 1% to $490.2 million.
Refranchising is a key part of Krispy Kreme's turnaround strategy. Selling company-operated stores to franchisees is helping Krispy Kreme pay down debt and improve its profit margins and cash flow.
The company's Q3 adjusted net income rose sevenfold to $9.9 million, or $0.06 per share.
Raised guidance
Looking ahead, Krispy Kreme lifted its full-year net revenue target range to $1.35 billion to $1.4 billion, up from a prior forecast of $1.25 billion to $1.35 billion.
Systemwide sales are projected to rise 2% to 4% to $1.96 billion, driven by at least 100 franchised store openings. The company also expects to generate free cash flow of over $15 million.
"Our results demonstrate the success of the actions we are taking to drive sustainable, profitable growth," CEO Josh Charlesworth said.
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Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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