Krispy Kreme Q4 revenue beats estimates as doughnut maker targets debt reduction

By Scott Kanowsky 

Investing.com -- Krispy Kreme, Inc. (NASDAQ:DNUT) reported better-than-expected sales in the fourth quarter, as the US-based doughnut maker looks to reduce its debt load and improve profits in 2023.

The company, which returned to public markets in July 2021 following a takeover by investment group JAB Holding Co., has been investing in developing a new distribution plan that aims to ensure the quality of its sweet treats delivered to third parties like supermarkets or fast food chains. The strategy, dubbed by the group as the "hub-and-spoke" model, utilizes capacity at its retail sites to deliver items to nearby stores.

While still a private entity, Krispy Kreme moved to bolster the hub-and-spoke system by snapping up a number of franchises, incurring debt it is now trying to pay off. As of January 1, net debt stood at $746 million, it said.

The group added that it expects to reduce its net leverage this year and make progress toward its ultimate goal of achieving a total leverage ratio of about 2.0 to 2.5 by the end of 2026.

The spoke-and-hub strategy showed signs that it is aiding overall performance, helping drive total revenue up to $404.6M during the last three months of 2022, an increase of 9.2% compared to the same period in the prior year and above Bloomberg consensus estimates of $395M.

But efforts to optimize the model, particularly through the closure of underperforming stores, led the firm to book an expense of $12.4M in the final three months of 2022. This cost contributed to a net loss of $1M on a GAAP accounting basis.

"We are pleased with the strong end to 2022, with notable progress on expanding our omni-channel model, furthering our global growth strategy and executing successfully on the initial phase of our hub optimization efforts," said chief executive officer Mike Tattersfield in a statement.

"Our performance this year will be led by continued expansion of our capital efficient omni-channel model as we aim to grow our fresh points of access by 10% to 15% in 2023."

Shares in Krispy Kreme rose in early US trading on Wednesday.