Krispy Kreme Stock Tumbles On Q4 Performance Lag, Weak Annual Outlook

Krispy Kreme (DNUT) stock took a significant hit on Tuesday, February 25, 2025, following the company's release of fourth-quarter and full-year 2024 financial results. The stock plummeted by 23.40% to $6.98 in premarket trading, driven by disappointing earnings and a weak outlook for the coming year. Let's dive into the key factors contributing to Krispy Kreme's underperformance and explore the company's strategic plans to address these issues.



Krispy Kreme's fourth-quarter FY24 sales declined by 10.4% year-on-year to $404 million, missing analyst estimates by $10.45 million. Organic revenue grew by a mere 1.8% to $400.6 million, which was negatively impacted by an estimated 280 basis points of lost revenue due to the 2024 Cybersecurity Incident. The company also incurred approximately $3 million in remediation expenses related to the incident. Global Points of Access increased by 3,410, or 24.1%, to 17,557 in FY24, indicating a strong focus on expansion.



The company's operating loss widened to $11.5 million from $5.3 million in the previous year, while adjusted EBITDA plunged by 28.4% year-on-year to $45.9 million. The EBITDA margin contracted by 280 basis points to 11.4%. Adjusted EPS of $0.01 missed the consensus estimate of $0.10, and the company held $28.9 million in cash and equivalents as of December end.

Krispy Kreme's CEO, Josh Charlesworth, acknowledged the challenges faced by the company and outlined several strategic initiatives to drive capital-efficient growth:

1. Restructuring management teams: Krispy Kreme has restructured its management teams to maximize profitable U.S. expansion and capital-light international growth.
2. Outsourcing U.S. logistics: The company expects to soon award contracts to outsource U.S. logistics, which could help improve operational efficiency and reduce costs.
3. Evaluating refranchising international markets: Krispy Kreme has begun a process to evaluate refranchising certain international markets, which could help drive capital-efficient growth.



Looking ahead, Krispy Kreme expects FY25 revenue of $1.55 billion to $1.65 billion, versus an estimate of $1.764 billion. The company sees FY25 adjusted EPS of $0.04 to $0.08, with an estimate of $0.30. Krispy Kreme anticipates FY25 adjusted EBITDA of $180 million to $200 million.

In conclusion, Krispy Kreme's underperformance in the fourth quarter was primarily driven by the 2024 Cybersecurity Incident, the sale of Insomnia Cookies, and a decline in retail sales. To address these issues, the company has taken several strategic steps, including restructuring management teams, outsourcing U.S. logistics, and evaluating refranchising opportunities. Investors should closely monitor Krispy Kreme's progress in implementing these initiatives and their impact on the company's financial performance in the coming quarters.