Doughnut chain Krispy Kreme (NASDAQ:DNUT) missed Wall Street’s revenue expectations in Q1 CY2025, with sales falling 15.3% year on year to $375.2 million. Its non-GAAP loss of $0.05 per share was in line with analysts’ consensus estimates.
Revenue: $375.2 million (15.3% year-on-year decline)
Adjusted EPS: -$0.05 vs analyst estimates of -$0.05 (in line)
Revenue Guidance for Q2 CY2025 is $377.5 million at the midpoint, below analyst estimates of $391.5 million
EBITDA guidance for Q2 CY2025 is $32.5 million at the midpoint, below analyst estimates of $41.83 million
Adjusted EBITDA Margin: 6.4%
Locations: 17,982 at quarter end, up from 14,814 in the same quarter last year
Market Capitalization: $498.7 million
StockStory’s Take
Krispy Kreme’s first quarter performance was shaped by several operational shifts and a challenging consumer environment. CEO Joshua Charlesworth highlighted the company’s prioritization of profitable growth, noting that efforts were made to reduce discounting and focus on higher-margin core products, such as its original glazed doughnut. The company also began closing unprofitable doors and refining its distribution through strategic delivery partners. CFO Jeremiah Ashukian pointed to lingering impacts from a cybersecurity incident and softness in U.S. retail channels as headwinds, while reiterating that the sale of Insomnia Cookies influenced year-on-year comparisons. Management described their overall approach as “swift and decisive action to deleverage the balance sheet and achieve profitable growth.”
Looking ahead, Krispy Kreme’s guidance reflects a conservative stance, with a pause on its national McDonald’s rollout and an emphasis on cost efficiency and capital discipline. Charlesworth stated, “We are partnering with McDonald’s to increase sales by stimulating higher demand and cutting costs by simplifying operations.” The company is also accelerating plans to outsource logistics and refranchise select international markets, aiming to generate cash flow and reduce debt. Ashukian emphasized the intent to “prioritize the highest returning investments” and indicated that further U.S. store closures are planned to protect margins. Management withdrew full-year guidance, citing uncertainties around the macro environment and the pace of improvement with key partners.
Key Insights from Management’s Remarks
Management attributed quarterly performance to lower U.S. consumer demand, a deliberate reduction in promotional activity, and operational disruptions from the 2024 cybersecurity incident. The pause in the McDonald’s expansion also weighed on results, as did the exit from the Insomnia Cookies business.
Focus on core product margins: Emphasis on the original glazed doughnut, which appeals to value-sensitive consumers and delivers higher margins, underpinned the company’s shift away from frequent discounting. New flavor innovations, such as the Fruity Pebbles glaze, helped to maintain consumer interest despite reduced promotional activity.
Operational changes in distribution: Krispy Kreme began outsourcing fresh doughnut delivery, with a goal to fully outsource U.S. logistics by mid-next year. Early results indicate more predictable costs and improved service rates, freeing up in-house resources to focus on core operations.
Strategic partner channel adjustments: The company expanded its presence in club stores like Costco and launched pilots with Sam’s Club, targeting high-volume channels. Simultaneously, it closed underperforming doors—particularly with smaller regional partners—to concentrate on sustainable sales per location.
McDonald’s rollout paused: After an initial surge, demand at McDonald’s locations fell below expectations, prompting a pause in further rollouts. Management is now working with McDonald’s to improve economics and sales processes before resuming expansion, noting that no new launches are expected in the next quarter.
International franchise momentum and restructuring: Capital-light growth through international franchising continued, with new launches in Brazil and expansions in markets like Australia and France. Management also signaled potential refranchising in several developed markets to raise cash and reduce capital intensity.
Drivers of Future Performance
Krispy Kreme’s near-term outlook is shaped by a cautious approach to expansion, operational streamlining, and tighter capital management amid ongoing macroeconomic headwinds.
Pausing unprofitable growth: The company plans to close 5–10% of U.S. distribution points this year, focusing on higher-volume, more profitable locations. Management is withholding further McDonald’s expansion until profitability and demand dynamics improve, which may limit near-term revenue growth but support margins.
Accelerating cost efficiency measures: Outsourcing logistics and simplifying operations are expected to generate margin improvements. The company also aims to reduce SG&A (selling, general, and administrative) expenses and leverage new incentive programs to drive execution, though these efforts may carry execution risk.
Refranchising and capital reallocation: Krispy Kreme is evaluating refranchising several international markets, with proceeds intended to pay down debt. The discontinuation of the dividend and amendments to its term loan provide additional liquidity, but success depends on finding the right partners and execution of asset sales.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will be tracking (1) whether margin improvement materializes from cost-cutting efforts and logistics outsourcing, (2) the pace and impact of U.S. distribution closures and refranchising initiatives in key international markets, and (3) the company’s ability to reignite demand with strategic partners like McDonald’s. The effectiveness of new marketing campaigns and product innovations will also be key areas of focus.
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