Krispy Kreme (KKD) execs didn't seem panicked about missing estimates slightly in Q2 as they pointed to the impact of refranchising, a smaller store format, and a strong comp from last year during the firm's conference call.
Looking ahead, the early report on comparable store sales for Q3 is "choppy" at best. The first three weeks of August average a 5.7% Y/Y gain in comp sales, ranging from a week of a 12% gain to a flat week.
Shares of Krispy Kreme (KKD) aren't looking too sweet after hours, falling 11% as merely affirming EPS guidance is apparently no longer sufficient to keep the market happy — especially when you come up two pennies short of consensus on the bottom line. (Q2 results)
Same-store sales jump 10% for the quarter, the nineteenth straight time comps have been positive. "Our dramatic same store sales gain was driven primarily through higher traffic counts as customers found more reasons to treat themselves to our unique products," CEO James Morgan says.
Revenue and adjusted net income rise 10.4% and 17.2% respectively in Q2.
FY14 outlook: EPS of $0.59-0.63 against consensus of $0.64. (PR)
Fast food workers aren't likely to see a broad increase in their wages to $15 per hour, but the heightened calls for unionization and focus on benefits could be drag on the sector in the future.
Economists say a raise in the minimum wage to $10.50 per hour would increase restaurant expenses by 2.7% which could be passed on with higher menu prices. The trick is in a promotional environment, and with more menus tied to value, the pass-through to consumers might not be smooth as academics forecast.
Despite the largely positive reading on retail sales, the dominant event for retail this week will come from Bentonville, Arkansas when Wal-Mart (WMT -0.6%) reports Q2 earnings and offers up some hints about Q3.
Some retail analysts have an uneasy feeling that the selling pressure on retail-oriented stocks could extend to restaurants.
The group has held up fairly well even as McDonald's continues to have a spotty sales year and blunt assessments from industry execs - including last week's revelation from Brinker International during a conference call (transcript) that fast casual dining is a "fairly lethargic" category.
Buy the donuts, but pass on Krispy Kreme (KKD +0.8%), writes Dimitra Defotis in Barron's. After more than tripling in the past year, the stock trades at 32x earnings and this morning announced a $50M buyback plan (vs. $20B completed in 2012), but perhaps the cash might be better put to work growing the business as this multiple leaves little room for error.
Great job OM on getting out of $KKD when you did!!
Jun 2, 4:12 PM
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Krispy Kreme Doughnuts Inc is a branded retailer and wholesaler of doughnuts, complementary beverages and treats and packaged sweets. The Companys shops are operated under the trademark doughnuts such as Krispy Kreme and Original Glazed.