Wednesday, March 30, 2011

Krispy Kreme Doughnuts (NYSE: KKD): Q4 Earnings Preview 2011

Krispy Kreme Doughnuts, Inc. Co (NYSE: KKD) is scheduled to release its fiscal fourth quarter earnings after the closing bell on Thursday, March 31, 2011. Analysts, on average, expect the company to report earnings of $0.04 on revenue of $92.55 million. 

Krispy Kreme is a branded specialty retailer and wholesaler of premium quality sweet treats and complementary products, including its signature Original Glazed doughnut. Krispy Kreme operates stores in over 640 locations in 21 countries around the world. 

In the preceding third-quarter, the Winston-Salem, North Caorlina-based company's net income was $2.4 million or $0.03 per share compared to a net loss of $2.4 million or $0.04 per share in the same quarter last year. Revenue grew 7.9% to $90.2 million from $83.6 million in the comparable quarter a year ago.  Analysts, on average, expected the company to report a loss of $0.01 per share on revenue of $87.75 million. 

At its last earnings call in December, the company raised its fiscal 2011 operating income guidance, exclusive of impairment charges and lease termination costs, to a range of $17 million to $20 million. Previous guidance for operating income was $13 million to $17 million. 

The company expects same-store sales to grow in domestic stores in 2012, but will continue to remain challenging at international franchising stores. Additionally, Krispy Kreme views significant cost inflation in 2012. In fiscal 2012, Krispy Kreme plans to open 30 international franchise stores, 5 to 10 company stores, and 5 to 15 domestic franchise stores.

The company is seeking to more than double its international store count within five years. According to Jeff Welch, the president of the company's international-store operations, the goal is to have close to 1,000 international shops, up from 421 on Oct. 31. He said there also are plans for "significant growth" in the U.S.

The company recently announced that it plans to enter into a supply chain distribution agreement with Sysco Corporation, a marketer of food and related products to the foodservice and food-away-from-home industry. Under the proposed agreement, Sygma, a Sysco subsidiary, would distribute proprietary doughnut mixes, other ingredients and supplies to Krispy Kreme franchise and company shops in the eastern United States. Sysco subsidiary IFG would be responsible for export of Krispy Kreme goods to the 20 foreign countries in which the company's international franchisees operate. The proposed agreement is not expected to have a material effect on the company's consolidated revenues or balance sheet.

The company's stock currently trades at a forward P/E (fye Jan 31, 2012) of 23.55 and PEG Ratio (5 yr expected) of 0.74. In terms of stock performance, KKD shares have gained nearly 28% over the past year.

Full Disclosure: None.
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