Krispy Kreme Doughnuts Inc. saw a 21.3-percent increase in net income for the first quarter ended May 4.

Despite that healthy gain, the Winston-Salem, N.C.-based doughnut chain lowered its earnings-per-share guidance for the fiscal year to between 68 cents and 74 cents, a decrease from 73 cents to 79 cents. Krispy Kreme’s cautious guidance is due to higher expenses related to investment in a new enterprise resource planning system and costs related to its executive management succession.

“Taking all these factors into account, we felt it was prudent to revise our expectations for the balance of the year,” executive chairman James H. Morgan said in a prepared statement.

Morgan served as the company’s president and chief executive until June 1, when he was succeeded by Anthony N. Thompson.

Severe weather in the quarter also affected sales, especially at company-owned units in the Southeast, which saw a 1.5 percent decline in same-store sales. Overall, same-store sales rose 2.3 percent.

Corporate same-store sales results also suffered from a comparison to sales in the previous year’s quarter, which rose 12 percent.

Revenue increased 0.8 percent to $121.6 million, from $120.6 million in the first quarter last year, dampened by refranchising locations.

Krispy Kreme refranchised six locations in the previous fiscal year and currently operates 97 units.

Despite the lowered guidance, Roth Capital Partners indicated Krispy Kreme’s stock is a buy.

“We believe that KKD’s outlook is one of the most attractive in the restaurant industry,” Roth said. “We look for accelerated domestic and international expansion, while company-operated restaurant margins should continue to expand. The appointment of a new CEO signals the completion of the turnaround process and a transition to a growth and expansion mode.”
 

1Q NET INCOME

Result: $9.7 million
% Increase: 21.3% (from $8 million)

1Q REVENUE

Result: $121.6 million
% Increase: 0.8% (from $120.6 million)

1Q SAME-STORE SALES

% Increase systemwide: 2.3%

Source: Company report



Contact Bret Thorn at bret.thorn@penton.com.
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