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Krispy Kreme Doughnuts, Inc. Message Board

  • ultima70 ultima70 Aug 23, 2012 5:24 AM Flag

    earnings and conference call - some remarks

    First I need to give some kudos to the B. Riley analyst for his call just two days ago:

    "B.Riley expects Krispy Kreme to report higher than expected Q2 same-store sales
    at company owned stores and higher than expected pro forma EPS."

    The guy was right as these were the main positive takeaways from the call not to forget the strong cash-flow.

    Stock reaction was muted though in after hours - after initially gapping up 10% the stock fell into the red and closed the after hours session with only minimal gains.

    This was due to several factors:

    1.
    Overall revenues didn't meet analyst expectations as the international business continues to show huge declines in SSS due to "honeymoon effects from the substantial number of international store openings in recent years as well as cannibalization as markets develop". While unpleasant this has been an ongoing theme for a couple of quarters now and shouldn't come as a big surprise.

    2.
    Supply chain business profit would have been down actually but was helped by a big agricultural derivative gain.

    3.
    Tax. On a fully taxed base non-gaap eps would have been just $0.07. Due to big net loss carryovers the company doesn't need to pay taxes for many years to come, so I guess it is quite right to look at things like the company does, especially as they didn't change the calculation method.

    4.
    May SSS were actually down slightly and June and July were up big but this was helped by anniversary promotions and the doughnot day so some investors might scratch their head about SSS going forward. Company already cautioned that SSS growth will come down going forward.

    5.
    On the beverage side the new coffee offerings obviously have some difficulties to attract customers but of course it is summer and management is just at the beginning of the learning curve here.


    To get more information I would suggest to read the conference call transcript on seekingalpha which in fact shows mainly positive management comments about the business going forward.

    Bottom line:

    Another good quarter with strong profitability for KKD and even better cash generation. Management guided for more modest growth going forward but also talked about upcoming grwoth drivers and expanding store count expectations due to the introduction of the M110 which lowers start-up costs by 40%.

    Expect rather positive analyst commentary and some target reiterations. Would buy on any weakness. In fact the stock price should be up solidly at the end of the day.

 
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