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Why Krispy Kreme Stock Crushed It Today
Key Points
Krispy Kreme's turnaround strategy is working.
A new asset-light business model could be the key to the company's success.
Shares of Krispy Kreme (NASDAQ:DNUT) surged more than 30% on Thursday after the doughnut maker boosted its full-year sales forecast.
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Strengthening profitability
Krispy Kreme's net revenue declined 12.4% year over year to $328.8 million in its fiscal third quarter, which ended on Sept. 27.
The decline reflects the doughnut shop operator's shift toward a less capital-intensive, franchise-based business model. Roughly a quarter of the chain's systemwide sales -- the total dollar value of all Krispy Kreme product sales -- came from franchise-operated stores in fiscal 2025. That figure rose to 42% in the third quarter.
Management is targeting 50% of systemwide sales generated by franchisees by fiscal 2027. Third-quarter systemwide sales increased 1% to $490.2 million.
Refranchising is a key part of Krispy Kreme's turnaround strategy. Selling company-operated stores to franchisees is helping Krispy Kreme pay down debt and improve its profit margins and cash flow.
The company's Q3 adjusted net income rose sevenfold to $9.9 million, or $0.06 per share.
Raised guidance
Looking ahead, Krispy Kreme lifted its full-year net revenue target range to $1.35 billion to $1.4 billion, up from a prior forecast of $1.25 billion to $1.35 billion.
Systemwide sales are projected to rise 2% to 4% to $1.96 billion, driven by at least 100 franchised store openings. The company also expects to generate free cash flow of over $15 million.
"Our results demonstrate the success of the actions we are taking to drive sustainable, profitable growth," CEO Josh Charlesworth said.
Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.