Industry News | May 23, 2011
The Results Are In At Krispy Kreme
Krispy Kreme Doughnuts, Inc. reported financial results for the first quarter of fiscal 2012, ended May 1, 2011.
The company ended the first quarter with a total of 652 Krispy Kreme stores systemwide, a net increase of six shops during the quarter. As of May 1, 2011, there were 86 company stores and 566 franchise locations.
"We delivered a strong performance in the first quarter, characterized by double-digit revenue growth, a significant increase in consolidated operating income, and our best quarterly net profit since the fourth quarter of fiscal 2004," says James H. Morgan, president and CEO. "Substantially improved results in the Company Stores segment were a major driver of our improved results. We also benefitted from lower impairment charges and lease termination costs and a significant reduction in interest expense resulting from the January 2011 refinancing of our credit facilities.
"While commodity costs created some headwinds, and will continue to do so for the remainder of the year, we believe we are off to a good start in fiscal 2012," Morgan says. "We are pleased to reaffirm our outlook for consolidated operating income, exclusive of impairment charges and lease termination costs, of between $22 million and $24 million for the year, although we believe first quarter results make the high end of that range appear increasingly achievable."
For the first quarter ended May 1, 2011, revenues increased 13.6 percent to $104.6 million from $92.1 million. Year-over-year revenue increases were generated in all four business segments.
Direct operating expenses increased to $87.0 million from $77.2 million in the same period last year, but as a percentage of total revenues, were down slightly to 83.2 percent from 83.8 percent. General and administrative expenses decreased to $5.6 million from $5.7 million in the same period last year and, as a percentage of total revenues, decreased to 5.4 percent from 6.2 percent. Impairment charges and lease termination costs were $240,000 compared to $1.3 million in the year-ago period.
Operating income increased to $9.8 million from $6.1 million.
Interest expense decreased to $480,000 from $1.9 million, principally reflecting lower interest rates as a result of the January 2011 refinancing of the company's credit facilities as well as the reduced level of indebtedness.
Net income was $9.2 million ($0.13 per share diluted) compared to $4.5 million ($0.06 per share diluted), in the first quarter last year.
Company stores revenues increased 11.1 percent to $69.5 million from $62.5 million. Same-store sales at company stores rose 5.8 percent, the tenth consecutive quarterly increase. Price increases instituted during the first quarter to help offset higher input costs drove the increase, as higher customer traffic was offset by a decrease in the average guest check exclusive of pricing effects. The company stores segment posted an operating profit of $2.2 million, compared to breakeven results last year.
Domestic franchise revenues increased 7.7 percent to $2.4 million from $2.2 million, reflecting a 6.8 percent rise in sales by domestic franchisees. Same-store sales rose 4.6 percent at domestic franchise stores. The increase in revenues was offset by higher segment operating expenses, resulting in domestic franchisee segment operating income of $1.1 million in the first quarter of fiscal 2012, flat to last year.
International Franchise revenues increased 18.4 percent to $5.6 million from $4.8 million. A $500,000 reduction in initial franchise fees, reflecting 16 store openings in the first quarter of fiscal 2012 compared to 41 openings in the first quarter of fiscal 2011, was offset by higher royalty revenues reflecting a 16.4 percent increase in constant dollar sales by international franchise stores.
Adjusted to eliminate the effects of changes in foreign exchange rates, same store sales at international franchise stores fell 9.6 percent, reflecting, among other things, honeymoon effects from the over 300 stores opened internationally in the past three years, as well as cannibalization as markets develop. The rate of decline in constant dollar international franchise same store sales fell for the fifth consecutive quarter.
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