Krispy Kreme stock tumbles to all-time low as doughnut maker softens outlook - chof 360 news

Krispy Kreme (DNUT) investors haven't warmed to the company's transformation strategy.

Shares of the doughnut maker fell as much as 27% on Tuesday after the company missed Wall Street's metrics across the board for both the fiscal fourth quarter and full-year results. Net revenue fell 10.4% in the quarter to $404 million as the sale of its majority stake in Insomnia Cookies created a $101 million revenue hit while a cybersecurity incident had an $11 million impact.

Krispy Kreme CEO Josh Charlesworth told chof360 Finance that the quarter was "in line with expectations, excluding the very disruptive cyber incident we had last year."

For fiscal 2025, the company expects revenue growth to increase between 5% and 7%, below the Street's estimate. However, the company expects to continue to incur costs related to the cybersecurity incident as it pays fees to cybersecurity experts and advisers, the earnings release said.

The stock, which was a trending ticker on the chof360 Finance platform Tuesday, hit an all-time low, closing at $6.61 per share in the trading session. In the past year, shares have fallen 47% compared to a 17% gain for the S&P 500 (^GSPC).

Now, Charlesworth is trying to encourage investors to focus on long-term profitable growth as Krispy Kreme looks to expand its points of distribution in the US — and overall business — with US partners such as McDonald's (MCD), Walmart (WMT), Target (TGT), Kroger (KR), and now Costco (COST), as well as international franchise partners.

The company also plans to outsource US logistics soon.

"What's important is as we build out from being a regional player in the US to being a truly national player, we need to make sure we do it in a sustainable, streamlined way," Charlesworth said. "Selling the doughnuts out of the front of the shop versus actually running a more sophisticated food distribution system means that we need to go through change."

But while Krispy Kreme looks for efficiencies in distribution, it's facing US consumers still dealing with stubborn inflation.

Sales per hub (where fresh doughnuts are made) remained flat year-over-year in the US.

"The choppy start of the year is in our traditional retail shops, where we have seen the value-conscious consumer [remain] pressured," Charlesworth told chof360 Finance, adding that the company is "not seeing the same impact" at big box retailers.

It remains to be seen if investors are willing to hang on for Krispy Kreme's transformation.

"In the context of a still-choppy demand backdrop for the broader industry, the company will need to tightly grip the hands of investors and walk them through the puts and takes in order for shares to rebound," Citi analyst Jon Tower, who has a Neutral rating on shares, wrote in a note to clients. "In the absence of this, we see shares remaining under pressure in the near-term."

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