DNUT Q3 Deep Dive: Turnaround Plan Drives Margin Expansion Amid U.S. Store Optimization

Core Insights - Krispy Kreme reported Q3 CY2025 revenue of $375.3 million, missing analyst expectations of $378.2 million, reflecting a 1.2% year-on-year decline [6] - The company achieved a non-GAAP profit of $0.01 per share, significantly exceeding analysts' consensus estimates of -$0.05 [6] - Adjusted EBITDA was $40.6 million, beating estimates of $28.33 million, with a margin of 10.8% [6] Financial Performance - Revenue: $375.3 million vs analyst estimates of $378.2 million (1.2% year-on-year decline, 0.8% miss) [6] - Adjusted EPS: $0.01 vs analyst estimates of -$0.05 (significant beat) [6] - Adjusted EBITDA: $40.6 million vs analyst estimates of $28.33 million (10.8% margin, 43.3% beat) [6] - Operating Margin: -1.9%, improved from -4.2% in the same quarter last year [6] - Market Capitalization: $669.6 million [6] Strategic Initiatives - The company exited around 600 unprofitable U.S. locations and ended its partnership with McDonald's, focusing on high-traffic, high-margin locations [7] - Average weekly sales per door increased by 18% sequentially due to these strategic changes [7] - Management is pursuing a refranchising strategy in select international markets to accelerate unit growth and reduce capital intensity [7] Operational Efficiency - Over half of U.S. logistics are now managed by third-party partners, expected to fully roll out in 2026, leading to more predictable and potentially lower delivery costs [7] - Operational changes included optimizing production processes and improving labor management [7] International Expansion - Markets like Japan and Mexico showed organic growth, with new openings in Spain and upcoming entries into Uzbekistan and Brazil [8] - Collaboration with KFC in the UAE has expanded to over 200 outlets, demonstrating the scalability of the hub-and-spoke delivery model [8] Digital and Product Innovation - Limited-time offerings and a refreshed core doughnut menu contributed to higher-margin growth, alongside a 17% increase in U.S. digital sales [8] - Digital sales now account for over 20% of U.S. retail sales, highlighting its strategic importance [8]