Krispy Kreme Doughnuts Inc. reported earnings up 20% in the third quarter, as limited-time offers and promotions helped boost customer traffic.
However, the doughnut chain’s shares fell 4% to $19.40 in recent after-hours trading as earnings excluding one-time items and revenue missed analysts’ expectations.
Systemwide sales at domestic stores open at least 18 months rose 3.7%, as 3.3% growth at company-owned shops offset a decline of 2.9% at international franchise stores, excluding currency effects. Systemwide store count rose 4.6%.
For the period ended Nov. 2, Krispy Kreme reported a profit of $8.1 million, or 12 cents a share, up from $6.8 million, or nine cents a share, a year earlier. Excluding items such as a provision for deferred taxes, earnings rose to 18 cents from 16 cents. Revenue increased 7.6% to $122.9 million.
Analysts polled by Thomson Reuters expected per-share profit of 19 cents and revenue of $124 million.
President and Chief Executive Officer Tony Thompson commented: “We successfully engaged with Krispy Kreme fans and grew traffic during the third quarter through effective limited-time offers and other promotional and marketing incentives. Now that we have regained traffic momentum, in the fourth quarter we are working to balance top line growth with improved shop operating margins.
Looking ahead, we intend to bolster customer connectivity, strengthen existing relationships and build new ones through, among other things, the implementation of a new consumer engagement platform. The initial version of the platform, including our ‘My Krispy Kreme Treats’ loyalty program, is currently in limited testing in three markets, with a domestic rollout planned for later next year.”
Thompson continued: “Leveraging consumers’ love of our brand means more than just increasing doughnut purchases, as our coffee and other specialty beverages can and should play a larger role in our total sales mix over time. Our goal is to achieve a higher beverage attachment rate within our stores and greater beverage consumption at home, at work and on-the-go.
We are encouraged by the growing popularity of our in-shop coffee and espresso offerings, along with early traction of our Krispy Kreme packaged ground coffee, ready-to-drink beverages and K-Cup packs introduced over the past several quarters.
And as our store footprint grows, we will become more accessible as a retail beverage destination, which should promote more visits to Krispy Kreme not only by frequent beverage consumers but also by our core Krispy Kreme doughnut fans.”