Krispy Kreme, Inc. (DNUT) Q1 2025 Earnings Summary
Executive Summary
- Q1 2025 revenue was $375.2M and Adjusted EBITDA $24.0M, reflecting a divestiture-driven revenue step-down and margin compression from U.S. expansion and cybersecurity costs; Adjusted EPS was -$0.05 .
- Results were below Street on revenue and EBITDA, while EPS was slightly better; the company withdrew FY25 guidance and gave Q2 outlook of revenue $370–$385M and Adjusted EBITDA $30–$35M, citing macro softness and McDonald’s deployment reassessment .
- Management is pivoting to cash generation and deleveraging: discontinued the quarterly dividend, added $125M term loan capacity to pay down the revolver, and is evaluating refranchising of several international markets .
- U.S. APD fell to $587 as mix shifted and discounting was reduced; management is closing 5–10% of inefficient DFD doors and accelerating outsourced logistics to improve cost predictability and margins .
What Went Well and What Went Wrong
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What Went Well
- Strategic reset to “profitable growth and deleveraging”: discontinued dividend and amended credit facility for $125M incremental term loan capacity to reduce revolver usage .
- Operational simplification: outsourcing U.S. logistics is underway, with excellent service rates and predictable costs; target to fully outsource by mid‑2026, freeing teams to focus on serving consumers and efficiency in shops .
- Continued brand activation and POA growth: Global Points of Access rose 21.4% YoY to 17,982, with progress in club (Costco) and secondary displays in mass/grocery; e‑commerce availability expanded at Walmart/Target/Kroger .
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What Went Wrong
- McDonald’s rollout: after initial marketing, demand fell below expectations; DNUT paused additional launches in Q2 while working with McDonald’s on visibility and operational simplification to reach a profitable model .
- Margin pressure and lower leverage: Adjusted EBITDA margin fell to 6.4% (from 13.1% LY) on U.S. expansion costs and estimated ~$5M operational inefficiencies tied to the 2024 cybersecurity incident .
- U.K. softness and retail channel headwinds: international Adjusted EBITDA margin declined 400 bps to 12.5% on lower volumes and deleverage; U.S. retail traffic remained soft and discount days were reduced to support cash and mix .
Financial Results
Segment Net Revenues
Segment Adjusted EBITDA
KPIs
Guidance Changes
Earnings Call Themes & Trends
Management Commentary
- “We are taking swift and decisive action to pay down debt, de‑leverage the balance sheet and drive sustainable, profitable growth.”
- “We are partnering with McDonald’s to increase sales... and reassessing our deployment schedule... we do not expect to launch any additional restaurants in Q2.”
- “We have made the decision to discontinue the quarterly dividend... this capital will now be used to pay down debt.”
- “Our goal is to fully outsource U.S. logistics by the middle of next year... service rates are excellent, costs are now predictable, and we are seeing savings.”
Q&A Highlights
- CapEx prioritization: capital reallocation to highest returns; rephasing related to McDonald’s; balance sheet strengthening is priority one .
- Network pruning: exiting 5–10% of U.S. doors to improve profitability and mix .
- Refranchising: process launched; focus on strong partners; proceeds to debt paydown (no specific timeline/cash target disclosed) .
- McDonald’s demand dynamics: initial local marketing strong, then lower-than-expected post‑launch demand; working on visibility and cost cuts before expanding further .
- Cybersecurity quantification: ~$5M Q1 operational inefficiencies were contemplated; back‑of‑house restoration is complete and efficiencies improving .
- Sales per hub and retail softness: DFD and digital growth offset by retail softness and reduced discounting; U.S organic revenue -2.6% .
Estimates Context
- Q1 (Street vs Actual): Revenue consensus $378.3M* vs actual $375.2M → miss; Primary EPS consensus -$0.053* vs Adjusted EPS -$0.05 → slight beat; EBITDA consensus $28.3M* vs actual $24.0M → miss.
- Q2 outlook: Company guides revenue $370–$385M and Adjusted EBITDA $30–$35M ; Street will likely trim full-year estimates given withdrawn FY25 guidance and McDonald’s pause.
*Values retrieved from S&P Global.
Financials vs Estimates – Q1 2025
*Values retrieved from S&P Global.
Key Takeaways for Investors
- Near‑term: Expect estimate resets and heightened focus on Q2 delivery against tightened outlook; stock likely sensitive to McDonald’s unit economics and visibility improvements. Paused Q2 launches are a cautionary signal.
- Medium‑term thesis: Asset‑light refranchising, logistics outsourcing, and door pruning should improve cash conversion and margins; execution will be key to re‑rating.
- Margin rebuild drivers: discount rationalization, Original Glazed focus, outsourced logistics, and SG&A benefits from 2024 restructuring; watch APD stabilization and sales/door uplift in mass/club channels.
- Balance sheet: incremental $125M term capacity and dividend halt increase flexibility to delever; monitor net leverage trajectory (Q1 at 6.1x vs 4.5x FY’24).
- International: refranchising could surface proceeds to reduce debt and reduce capital intensity; U.K turnaround and Japan/Mexico network optimization are execution areas.
- McDonald’s: profitability-first stance is prudent; proof points needed on demand stimulation (visibility, operations simplification) before broader rollout resumes.
- Risk monitor: consumer softness in retail, cybersecurity residual impacts, currency headwinds internationally.