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Krispy Kreme sales remain strong in 4Q

Krispy Kreme sales remain strong in 4Q

Officials say the company isn't feeling the impact of depleted consumer income

Despite economic pressures, the fourth quarter of 2013 marked Krispy Kreme Doughnuts Inc.’s 17th consecutive quarter of same-store sales increases.

During the fourth quarter ended Feb. 3, same-stores sales rose 7.5 percent at company-owned locations and 9.6 percent for domestic franchisees, the company reported Thursday.

Krispy Kreme chief financial officer Douglas R. Muir noted that the company hasn’t seen much financial impact due to depleted consumer income during January and February. “Customers seem to be enjoying Krispy Kreme as much as ever, despite gas and the expiration of the payroll tax thing,” he said.

The company reported net income of $4.8 million, or $0.07 per share, for the fourth quarter, compared with $123.5 million, or $2.01 per share, for the year-earlier period.

Krispy Kreme also reported a revenue increase of 15.9 percent, from $102 million to $118.1 million, in the fourth quarter.

“As we have moved into the current year, we continue to see positive comparisons,” noted Muir. “[Same-store sales] rose 6.5 percent in February.”

During fiscal 2014, the company plans to continue to drive sales by promoting more occasions for consumers to buy donuts, marketing through social media, and by expanding the company’s beverage line, said Krispy Kreme chief executive James H. Morgan.

“People want more of what Krispy Kreme already provides, a selection of core flavors complemented by seasonal offerings, innovated LTO promotions, interesting doughnut and beverage pairings, and flavors to please local palettes in each of our 22 countries,” he said.

In a research brief, Stephens analyst Will Slabaugh predicted double-digit growth for Krispy Kreme in coming years, highlighting the brand’s strong same-store sales and new restaurants. “More impressive in our minds was management’s commentary around continued strength in February (+6.5%), amid the worst industry trends in nearly four years,” he wrote.

After the call, Janney Capital Markets analyst Mark Kalinowski gave Krispy Kreme a “neutral” rating, noting that 2014 will likely bring a host of challenges, despite the fact that the company is “undergoing a reinvigoration of sorts.”

During fiscal 2013, the company reported net income of $20.8 million, or $0.30 per share, compared with $166.3 million, or $2.33 per share in fiscal 2012. The large difference was due to net deferred income taxes in 2012.

The company saw increased revenue of 8.1 percent year over year, from $403.2 million to $435.8 million.

During fiscal 2013, same-store sales increased 5.5 percent driven by a 6.2-percent bump in customer traffic in stores.

For fiscal 2014, the Krispy Kreme is projecting adjusted net income between $37 million and $40 million, and adjusted earnings per share of $0.53 to $0.57. Previously, the company’s target range had been $0.49 to $0.55 per share, according to Kalinowski.

The company is aiming to increase in revenue at company stores by between 4 percent and 7 percent.

Winston-Salem, N.C.-based Krispy Kreme has more than 740 locations, most of which are outside the U.S.

Contact Erin Dostal at [email protected].
Follow her on Twitter: @erindostal

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