Krispy Kreme: Does The Partnership With McDonald's Justify The Price?

seekingalpha03-28

Krispy Kreme has reported strong quarterly earnings results, with total revenue and organic revenue increasing.The company's management is positive about the results and attributes the growth to ...

Source Link

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

We need your insight to fill this gap

Leave a comment

{"i18n":{"language":"en_US"},"isChannel":false,"data":{"share":"https://ttm.financial/m/news/2422313776?lang=en_US&edition=fundamental","thumbnail":"https://static.seekingalpha.com/cdn/s3/uploads/getty_images/458105537/image_458105537.jpg","is_english":true,"pubTime":"2024-03-28 15:56","share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","id":"2422313776","market":"fut","top_or_hot":-1,"title":"Krispy Kreme: Does The Partnership With McDonald's Justify The Price?","media":"seekingalpha","content":"<div>\n<p>Krispy Kreme has reported strong quarterly earnings results, with total revenue and organic revenue increasing.The company's management is positive about the results and attributes the growth to ...</p>\n\n<a href=\"https://seekingalpha.com/article/4680918-krispy-kreme-does-the-partnership-with-mcdonalds-justify-the-price\">Source Link</a>\n\n</div>\n","source":"seekingalpha","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Krispy Kreme: Does The Partnership With McDonald's Justify The Price?</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nKrispy Kreme: Does The Partnership With McDonald's Justify The Price?\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-03-28 15:56 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4680918-krispy-kreme-does-the-partnership-with-mcdonalds-justify-the-price><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Krispy Kreme has reported strong quarterly earnings results, with total revenue and organic revenue increasing.The company's management is positive about the results and attributes the growth to ...</p>\n\n<a href=\"https://seekingalpha.com/article/4680918-krispy-kreme-does-the-partnership-with-mcdonalds-justify-the-price\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"IE00BJJMRY28.SGD","symbol_name":"Janus Henderson Balanced A Inc SGD","start_time":0,"source_url":"https://seekingalpha.com/article/4680918-krispy-kreme-does-the-partnership-with-mcdonalds-justify-the-price","article_id":"2422313776","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/458105537/image_458105537.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2422313776","pubTimestamp":1711612583,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Or has the potential for growth already been fully factored in?","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"IE00BJJMRY28.SGD":"Janus Henderson Balanced A Inc SGD","BK4585":"ETF&股票定投概念","BK4534":"瑞士信贷持仓","BK4566":"资本集团","IE0004445015.USD":"JANUS HENDERSON BALANCED \"A2\" (USD) ACC","LU1430594728.SGD":"Eastspring Investments - Global Low Volatility Equity AS SGD","MCD":"麦当劳","BK4588":"碎股","BK4550":"红杉资本持仓","LU1244550221.USD":"FRANKLIN GLOBAL MULTI-ASSET  INCOME \"A\" (USDHEDGED) INC (M)","LU1244550577.SGD":"FTIF - Franklin Global Multi-Asset Income A (Mdis) SGD-H1","IE00BFSS8Q28.SGD":"Janus Henderson Balanced A Inc SGD-H","LU1718418525.SGD":"JPMorgan Investment Funds - Global Select Equity A (acc) SGD","BK4581":"高盛持仓","LU2133065610.SGD":"JPMorgan Investment Funds - Global Dividend A (mth) SGD","LU1585245621.USD":"EASTSPRING INV GLOBAL LOW VOLATILITY EQUITY FUND \"A\" (USD) ACC B","IE00BJTD4N35.SGD":"Neuberger Berman US Long Short Equity A1  Acc SGD-H","LU1244550494.USD":"FRANKLIN GLOBAL MULTI-ASSET INCOME \"A\" (USDHEDGED) ACC","BK4504":"桥水持仓","IE00B7KXQ091.USD":"Janus Henderson Balanced A Inc USD","LU0256863811.USD":"ALLIANZ US EQUITY \"A\" INC","BK4209":"餐馆","IE00BFSS7M15.SGD":"Janus Henderson Balanced A Acc SGD-H","DNUT":"Krispy Kreme, Inc.","IE00BJJMRX11.SGD":"Janus Henderson Balanced A Acc SGD","LU0417517546.SGD":"Allianz US Equity Cl AT Acc SGD","BK4539":"次新股","IE00BJTD4V19.USD":"NEUBERGER BERMAN US LONG SHORT EQUITY \"A1\" (USD) ACC"},"translate_title":"Krispy Kreme：与麦当劳的合作价格合理吗？","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"MCD":1,"DNUT":1},"content_text":"Krispy Kreme has reported strong quarterly earnings results, with total revenue and organic revenue increasing.The company's management is positive about the results and attributes the growth to strong consumer demand and increased access to their products.Krispy Kreme's partnership with McDonald's to roll out their doughnuts nationwide is expected to enhance distribution efficiency and profitability.On the other hand, the firm seems to be overpriced, which we believe is neither justified by the fundamentals, nor by the partnership with MCD.For these reasons, we rate the firm's stock as \"hold\".   KathyDewar Krispy Kreme (NASDAQ:DNUT), a global icon in the world of doughnuts, has captivated taste buds since its inception in 1937. Renowned for its melt-in-your-mouth Original Glazed doughnuts, the brand has expanded its delectable offerings to include a wide array of flavors and treats. With its irresistible combination of fluffy dough, heavenly glazes, and mouthwatering fillings, Krispy Kreme has become a household name synonymous with indulgence and joy. From its humble beginnings in Winston-Salem, North Carolina, to its widespread presence across continents, Krispy Kreme continues to delight doughnut enthusiasts of all ages with its freshly made, hot-off-the-line treats. And recently it has been just announced that their products will be available in McDonald’s locations nationwide. This raises the question: Is now the opportune time to invest in Krispy Kreme, given the recent news and surge in share price? Or has the potential for growth already been fully factored in? To address these questions, we'll begin by analyzing the company's most recent quarterly performance, evaluating its historical profitability, discussing its future prospects, and finally assessing its current valuation. Data by YCharts Quarterly earnings results In general, the firm has shown promising results both in the past quarter and past fiscal year. The company's total revenue rose by 11.4% to $450.9 million, while organic revenue increased by 13.2% to $446.0 million in Q4. GAAP net income reached $1.9 million, with a net income attributable to KKI of $2.6 million. Adjusted EBITDA also saw growth, climbing by 14.7% to $64.1 million, and adjusted EBITDA margins improved by 40 basis points to 14.2% in the prior quarter. Additionally, the number of Global Points of Access surged by 2,310, representing a 19.5% increase, reaching a total of 14,147 units as of quarter end. The firm’s management has been very positive about these results, especially as they have beaten previous expectations: We reported strong double-digit fourth quarter and full-year organic revenue growth in excess of our guide, [...] Our growth was driven by strong consumer demand in all sales channels and increased access to our fresh doughnuts around the world. We improved profitability as we grew, showing the productivity benefits of our unique Hub and Spoke operating model. Financial highlights (DNUT)Key operating metrics (DNUT) Let's further explore these findings. The company breaks down its financial performance into three segments: U.S., international, and market development. While each segment has contributed to revenue growth, the U.S. segment has shown the slowest rate, while market development has seen the highest. When considering organic revenue growth, which reflects demand more accurately compared to growth from new store openings, the narrative shifts slightly. Market development still leads in growth rate, but the international segment, not the U.S., now exhibits the slowest growth. Organic revenue growth (DNUT) In our view, it is clear that the demand for DNUT’s products is robust and grows at a significant pace. Important to note, however, that organic revenue growth has been slowing significantly in both the international and the market development segments. Further, the changes in EPS are not providing a clear picture, whether the firm is able to carry these growth figures in topline down to the bottom line results. For this reason, let us continue our discussion on profitability. Profitability While the profitability of the firm has improved and gross-/ operating margins have expanded, we believe that this expansion still does not place the firm at a place within the industry, where we would like to see it. The following chart and table show the dynamics of profitability and how it compares to DNUT's peers. Productivity gains (DNUT)Comparison (Seeking Alpha) We have to also realize that the expansion of the gross-/ operating margin have not lead to significant improvement of the bottomline results. Outlook The company expects net revenue to grow between 5% and 7%, with organic revenue growth projected to be between 6% and 8%. Adjusted EBITDA is anticipated to increase by 8% to 11%, while adjusted diluted EPS is estimated to be between $0.27 and $0.31. The income tax rate is forecasted to fall between 26% and 28%. Capital expenditures are expected to amount to 7% to 8% of net revenue, with interest expense netting between $55 million and $65 million. Outlook (DNUT)Expansion (DNUT) In summary, the reported results demonstrate DNUT's strong commitment to growth. Despite this, growth is projected to be modest, in the mid-single digits, for the upcoming fiscal year. To reignite growth, the partnership with McDonald's (MCD) will play a significant role. At least, that’s what is expected by many, especially when we consider the huge jump in the share price. McDonald’s partnership McDonald’s and Krispy Kreme announced plans to roll out Krispy Kreme doughnuts at McDonald’s restaurants nationwide by the end of 2026, with the launch starting in the second half of this year. The partnership aims to double Krispy Kreme's distribution over two and a half years, making McDonald’s its exclusive fast-food partner in the U.S. Krispy Kreme CEO Josh Charlesworth expects the expansion to enhance distribution efficiency and profitability. McDonald’s will offer popular Krispy Kreme varieties, boosting its bakery and breakfast lineup. The move reflects market trends and strategic adjustments amid concerns over competition and consumer preferences. In our opinion, looking forward, this is a very attractive move to reach the number of POAs and growth that DNUT is aiming for. MCD has a very strong brand recognition and a loyal customer base. We have even recently published an article about the firm and rated it as a “Buy”, partially for these reasons. Despite the expected improvements in profitability and sales, the question we have to ask ourselves, is how much we are willing to pay for this growth? After the recent jump in share price, is an investment still justified? We will try to answer these questions in our next section. Valuation To assess the valuation of DNUT, we are going to analyze a set of traditional price multiples and compare these with the consumer discretionary sector median and with those of DNUT’s peers and competitors in the restaurant industry. Valuation (Seeking Alpha) Based on these tables, we can see that DNUT is selling at a very significant premium. There are several reasons why we believe this valuation is not justified: 1.) As discussed above, from a profitability point of view, the firm is definitely not outstanding and we do not believe it could justify any premium. Proftability (Seeking Alpha) 2.) While the revenue has been growing rapidly, outpacing the peers, it has not been translated into bottomline growth. The partnership with MCD may help improve productivity, and therefore lead to bottomline growth as well, but it is highly uncertain at the moment. The full realization of the partnership is also not until 2026, which means there is still a very long time until any potential synergies could be fully realized. Growth (Seeking Alpha) 3.) Liquidity is less attractive than that of its peers. When we look at the current ratio and quick ratio, they are less than 1 and significantly lower than those of its peers. While the firm is working on deleveraging, we would like to see those initiatives realized, before we could justify such high price multiples. Balance sheet (Seeking Alpha)  All in all, we believe that the partnership with MCD could unlock significant value for DNUT and its shareholders, however the current price is too high. We would like to see the stock price dropping significantly, before we could get bullish on DNUT's stock. At this point, we find MCD's stock the more interesting and appealing investment option.","kind":null,"is_publish_news":null,"is_publish_highlight":null,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.22.4","shortVersion":"4.22.4","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2422313776"}