Krispy Kreme’s third quarter sales fell to $379.9 million, marking a 6.8% decline compared to the same quarter. In the U.S., margins declined to 6.1% – a 250-basis-point drop year-over-year – due to incremental vehicle accident claims costs and startup costs (equipment, training, etc.) related to the company’s expanding partnership with McDonald’s.
Otherwise, that partnership, as well as Krispy Kreme’s other “DFD” (Delivered Fresh Daily) partnerships with retailers like Target, Walmart, and Costco, remain a bright spot, driving year-over-year organic revenue growth of 3.5% to $376.4 million. The DFD channel grew by 15% during the quarter.
Krispy Kreme is accelerating its rollout with McDonald’s, currently adding new markets in Indiana, Ohio, West Virginia, and Pennsylvania, on top of its expansion into Chicago last month. The company expects nearly 2,000 McDonald’s restaurants to sell Krispy Kreme doughnuts by the end of this year, while the nationwide rollout is expected to be complete by the end of 2026. The quick-service burger giant is supporting the partnership through comprehensive local marketing plans, including television, social media, and out-of-home billboards.
CEO Josh Charlesworth said the partnership has so far generated a positive response from consumers and there has been no impact on nearby Krispy Kreme shops.
“It’s more convenient to pick up and customers can enjoy doughnuts any time of the day. We’re pleased with the start both from a consumer response point of view and reception from the McDonald’s team,” he said. “Partnering with high quality national players with the goal of making it easier for consumers to buy fresh doughnuts is clearly working.”
McDonald’s is a major catalyst in Krispy Kreme’s global points-of-access goal. The company currently has nearly 16,000 points of access across 40 countries with plans to get to nearly 35,000 points of access in about 50 countries in about three years.
This, Charlesworth adds, will not only make Krispy Kreme bigger, but “a better business.” He added that the company expects an estimated $340 million to $430 million in incremental revenue from the expansion of its DFD business.
That said, as the company grows, so does the scale and complexity of delivery. In response, Krispy Kreme is currently testing third-party delivery options for its DFD business and has already proven its efficiency in several international markets. Third-party delivery versus first-party delivery allows the company to focus more on making doughnuts, Charlesworth said. He added that it will take some time to work out the delivery piece, including how many stops are made on a route, distance and drive times, etc.
Following its majority stake sale in Insomnia Cookies in July, Krispy Kreme is now focused on restructuring its management teams to support that “bigger and better” business, as well as to maximize profitability. The restructuring is expected to contribute an annualized G&A savings of $8 million to $12 million beginning in 2025.
Krispy Kreme Q3 by the numbers
- Net revenue was $379.9 million in Q3 2024, a decline of 6.8%, compared to $407.4 million in the same quarter last year.
- GAAP net income was $37.6 million, including the gain on divestiture of a controlling interest in Insomnia Cookies, compared to prior year net loss of $40.3 million.
- GAAP diluted earnings per share was $0.23, compared to a loss of $0.24 in the same quarter last year.
- Total company organic revenue grew 3.5% compared to the same quarter in the prior year.
- Delivered Fresh Daily (“DFD”) sales and digital sales both grew 15%, more than offsetting expected consumer softness in U.S. Retail and the U.K.
- Adjusted EBITDA was $34.7 million, a decline of 20.7% largely driven by the sale of a majority ownership stake in Insomnia Cookies.
- Global Points of Access (“POA”) increased 2,417, or 18%, to 15,811
Contact Alicia Kelso at [email protected]
