CHARLOTTE, NC. — The first quarter ended April 3 proved profitable for Krispy Kreme, Inc., maintaining the company’s gains established in the fourth quarter last year. In a first-quarter earnings call with analysts, Michael J. Tattersfield, president and chief executive officer of Krispy Kreme, credited much of the company’s growth to an expansion of delivered fresh daily (DFD) doors and an increased number of limited-time offerings (LTOs).
Net income for the first quarter was $4 million, equal to 2¢ per share on the common stock, which compared with a loss of $3.06 million in the same quarter last year. Net sales increased nearly 16% to $372.53 million from $321.81 million.
The company’s “biggest growth opportunity” moving forward is to build on the success of its hub-and-spoke distribution model and increase DFDs by 10% globally this year, said Mr. Tattersfield.
“Supporting this expansion will be the addition of 10 to 15 new equity hubs added per year as well as 5 to 10 franchise hubs,” Mr. Tattersfield said. “Each will be located and designed to maximize the hub-and-spoke system with 50 to 80 additional points of access per hub over time. Each new hub investment has a goal of a three-year total payback period.”
DFD growth promotes wholesale distribution as well as e-commerce retail growth, according to the company.
“E-commerce is a core pillar of our omnichannel strategy,” Mr. Tattersfield said. “In the first quarter, 17.4% of our retail sales came from e-commerce, up from less than 10% pre-pandemic and 17.2% for the full year 2021, with a goal to achieve e-commerce penetration of over 25% globally long term.”
Krispy Kreme subsidiary Insomnia Cookies has provided the company a firsthand example of the durability of e-commerce. Joshua Charlesworth, chief operating officer and chief financial officer of Krispy Kreme, discussed the advantages of e-commerce in recent years.
“Our digital-first Insomnia Cookies business overcame disruption early in the quarter from both omicron and weather events in the Northeast to deliver double-digit revenue growth with margins again in line with the average for the US and Canada segment,” Mr. Charlesworth said. “We opened seven new cookie shops in the first quarter, reaching 217 in total across the US.”
The success of LTOs such as a collaboration with Cinnamon Toast Crunch cereal, a mashup with Twix candy bars and a re-release of the hand-cut cinnamon rolls on Sundays helped propel consumer interest in products with a higher price point than the classic glazed donut, which in turn helped “provide a notable offset to current inflationary pressures,” said Mr. Tattersfield.
Branded sweet treats such as shelf-stable donut bites and mini crullers are on track to be profitable by the middle of 2022, according to the company.
“Overall, we continue to be very optimistic about our growth potential, which is reflected by our reaffirmed 2022 outlook,” Mr. Charlesworth said. “As a reminder, in 2022, we expect revenue growth between 11% and 13% and organic growth between 10% and 12% with over 1,000 more points of access than last year. We expect all three reporting segments to contribute to this growth. And after the strong start to the year, we now expect to be at the top end of this range.”