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Doughnut chain Krispy Kreme (NASDAQ:DNUT) reported Q2 CY2024 results beating Wall Street analysts' expectations, with revenue up 7.3% year on year to $438.8 million. The company's full-year revenue guidance of $1.67 trillion at the midpoint also came in 93,323% above analysts' estimates. It made a non-GAAP profit of $0.05 per share, down from its profit of $0.07 per share in the same quarter last year.
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Krispy Kreme (DNUT) Q2 CY2024 Highlights:
- Revenue: $438.8 million vs analyst estimates of $434 million (1.1% beat)
- EPS (non-GAAP): $0.05 vs analyst expectations of $0.05 (1.4% miss)
- EPS (non-GAAP) guidance for the full year is $0.26 at the midpoint, missing analyst estimates by 2.7%
- Gross Margin (GAAP): 27%, in line with the same quarter last year
- EBITDA Margin: 12.5%, in line with the same quarter last year
- Free Cash Flow of $1.56 million is up from -$46.77 million in the previous quarter
- Market Capitalization: $1.55 billion
Famous for its Original Glazed doughnuts and parent company of Insomnia Cookies, Krispy Kreme (NASDAQ:DNUT) is one of the most beloved and well-known fast-food chains in the world.
Traditional Fast FoodTraditional fast-food restaurants are renowned for their speed and convenience, boasting menus filled with familiar and budget-friendly items. Their reputations for on-the-go consumption make them favored destinations for individuals and families needing a quick meal. This class of restaurants, however, is fighting the perception that their meals are unhealthy and made with inferior ingredients, a battle that's especially relevant today given the consumers increasing focus on health and wellness.
Sales GrowthKrispy Kreme is larger than most restaurant chains and benefits from economies of scale, giving it an edge over its smaller competitors.
As you can see below, the company's annualized revenue growth rate of 13.9% over the last five years was impressive as it added more dining locations and expanded its reach.
This quarter, Krispy Kreme reported solid year-on-year revenue growth of 7.3%, and its $438.8 million in revenue outperformed Wall Street's estimates by 1.1%. Looking ahead, Wall Street expects sales to grow 6.1% over the next 12 months, a deceleration from this quarter.
Cash Is KingIf you've followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills.
While Krispy Kreme's free cash flow broke even this quarter, the broader story hasn't been so clean. Over the last two years, Krispy Kreme's capital-intensive business model and large investments in new physical locations have drained its resources. Its free cash flow margin was among the worst in the restaurant sector, averaging negative 2.8%.
Taking a step back, we can see that Krispy Kreme's margin dropped by 7.6 percentage points during that time. If this trend continues, it could signal it's becoming a more capital-intensive business.
Krispy Kreme broke even from a free cash flow perspective in Q2. The company's cash profitability regressed as it was 1.6 percentage points lower than in the same quarter last year, but it's still above its two-year average. We wouldn't put too much weight on this quarter's decline because investment needs can be seasonal, causing short-term swings. Long-term trends are more important.
Key Takeaways from Krispy Kreme's Q2 Results We were impressed by Krispy Kreme's optimistic full-year revenue guidance, which blew past analysts' expectations. We were also glad its revenue outperformed Wall Street's estimates. On the other hand, its EPS missed and its full-year earnings guidance fell short. Overall, this was a mixed quarter for Krispy Kreme. The stock traded up 2.4% to $9.45 immediately after reporting.
