Stock Market Slams Down Krispy Kreme Shares Due to Financial Concerns Today
Krispy Kreme Announces Comprehensive Turnaround Plan
Krispy Kreme, the globally recognised doughnut chain, has unveiled a four-pronged turnaround plan aimed at streamlining operations, reducing debt, and driving sustainable growth. The announcement came following the release of the company's Q2 2025 earnings report.
The plan focuses on four main aspects: deleveraging the balance sheet, expanding margins, driving returns on invested capital (ROIC), and pursuing quality, sustainable U.S. growth.
To delever the balance sheet, Krispy Kreme plans to refranchise international markets and restructure domestic joint ventures. This move is expected to raise cash and reduce debt by approximately $940 million, through divestments such as the sale of its stake in Insomnia Cookies and the restructuring of its joint venture with WKS Restaurant Group.
The company aims to expand margins via operational efficiencies such as outsourcing U.S. logistics and simplifying the business following the end of its partnership with McDonald’s. Krispy Kreme also intends to widen its profit margins by implementing efficiency measures.
In a bid to drive ROIC, Krispy Kreme plans to reduce capital intensity and focus on franchisee growth rather than company-owned stores. The company also targets growth through approximately 1,100 new high-volume doors this year.
To ensure quality, sustainable U.S. growth, Krispy Kreme plans to replace underperforming delivery doors with higher-volume national accounts to improve profitability in the delivered fresh daily (DFD) business.
Additional actions include laying off 15% of corporate employees to cut costs, exiting 1,500 underperforming delivery venues (more than half already closed), and targeting growth through approximately 1,100 new high-volume doors this year.
Despite these efforts, Krispy Kreme was not profitable on a non-GAAP basis, reporting a net loss of $25 million, or $0.15 per share, in the second quarter. Analysts had expected a net loss of only $0.04 for the same period.
The turnaround plan does not disclose any financial projections or targets for future quarters, nor does it reveal a timeline for its implementation. The company is, however, optimistic about beginning to recoup profitability starting Q3 2025 and driving positive cash flow in the second half of 2025.
The turnaround plan involves refranchising, particularly in foreign markets, but does not specify any details about the outsourcing of non-U.S. logistics. The plan also does not mention any specific changes in the company's product offerings or marketing strategies.
On the day of the announcement, Krispy Kreme's share price dropped by 7%, reflecting market players finding the stock unappealing. This decline was notably worse than the marginal drop in the S&P 500 index on the same day.
The company's revenue for the second quarter was approximately $380 million, down from $439 million in the same quarter of 2024. This decline can be attributed in part to the dissolution of Krispy Kreme's partnership with McDonald’s, which contributed to a 13.5% decline in Q2 net revenue.
[1] BusinessWire
[2] CNBC
[3] Reuters
[4] Yahoo Finance
[5] The Wall Street Journal
- Krispy Kreme's turnaround plan includes a focus on driving returns on invested capital (ROIC) by reducing capital intensity and growing through franchisees, attempting to increase profitability.
- To fund its turnaround plan, Krispy Kreme plans to refranchise international markets and restructure domestic joint ventures, with expectations to raise over $940 million through divestments.
- As part of its comprehensive plan, Krispy Kreme aims to improve its financial position by widening profit margins, streamlining operations, and pursuing quality, sustainable growth in the U.S. business.
