Krispy Kreme Doughnuts’ (KKD) stock has slumped Friday after the chain missed Wall Street’s profit forecasts. But Janney Capital Markets is urging clients to take another bite.
Direct operating expenses were a factor in the final 2Q earnings of 14 cents per share — those costs rose 9.5%. Investors were also met with a disappointing 13% drop in foreign sales. This morning’s media coverage, meanwhile, has focused on the apparent costliness of expanding internationally. “That’s important for a company where its strategy has been to diversify abroad especially to Asia,” writes Miller Tabak & Co. strategist Andrew Wilkinson.
The Wall Street Journal’s Tom Di Fonzo None of that is the focus Friday for Janney’s Mark Kalinowski and Amy Babington, who were impressed with the 10% same-store-sales growth in domestic company-owned stores. As they wrote in a client note:
Domestic same-store sales trends remain highly encouraging, with fiscal Q2 comps up by +10.0% for company-owned stores (just below our "high on the sell-side" estimate of +10.5%), and by +11.5% for franchised outlets (above our "high on the sell-side" projection of +10.5%). In addition, Krispy Kreme reveals that for the first three weeks of fiscal Q3 (essentially August/September/October), same-store sales for U.S. company-owned stores were +5%, +12%, and flat, respectively – suggesting a nearly +6% type trend to start fiscal Q3.
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KKD is down more than 14% to $19.95 in Friday afternoon trading. Dunkin’ Brands Group (DNKN), by comparison, has fallen 0.1% to $43.04.
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