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Krispy Opens 500th Overseas Unit

Zacks Equity Research

Consistent with the successful execution of overseas expansion, Krispy Kreme Doughnut Inc. (KKD) opened its 500th international unit in Aguascalientes, Mexico this month. The store opening supports Krispy Kreme’s goal of opening 900 international units by 2017.

Krispy Kreme opened its first international unit 11 years ago. Since then, the company has spread its footprints to 20 locations across Latin America, the United Kingdom, Asia Pacific and the Middle East.

The company launched its first unit in Mexico in 2004. The new unit based in Aguascalientes marked the company’s 90th store in the country. The unit is owned and operated by the company’s licensed franchise in Mexico — Taco Holding, S.A. de C.V.

Over the past five years, major restaurant operators in Mexico have enjoyed increased market acceptance on the back of booming demand. According to global market research company IBISWorld, the Mexican Restaurants industry revenues have grown at an estimated annualized five-year rate of 1.4% to $30.7 billion since 2007. This includes a 1.5% revenue enhancement in 2012 driven by consumer spending recovery. Krispy Kreme’s major peer Chipotle Mexican Grill, Inc. (CMG) has a strong presence in Mexico and enjoyed average annual revenue growth of around 20.5% over the past five years.

In the last one year, Krispy Kreme inked several development deals with franchises to expand across India, Russia, the Philippines, the United Kingdom and other countries. It includes the company’s deal with Star360 Group to set up 15 Krispy Kreme franchise locations in Singapore over the next five years.

Based in Winston-Salem, North Carolina., Krispy Kreme is a leading branded specialty retailer of premium quality doughnuts. As of September 30, 2012, the company operated 730 stores across 21 countries.

We currently have long term Outperform recommendation on Krispy Kreme. Also, it carries a short term Zacks #2 Rank (Buy).

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