Winston-Salem, North Carolina-based fastfood giant Krispy Kreme has today [Thursday] posted net income of US$8.9m for its Q2 2003, ended 4 August, up 49.8% from US$5.9m year on year.
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Diluted earnings per share (EPS) increased to US$0.15 in the Q2 compared with US$0.10 for the same period in FY 2002.
Systemwide sales, including sales of company and franchise stores, increased 29.5% to US$186.9m in the Q2, compared with US$144.3m in the Q2 2002, and the company explained that the sales were driven by an increase in company store sales of 21.5% to US$74.7m and a 35.5% increase in franchise store sales to US$112.2m. On a comparable store basis, systemwide store sales increased 12.8% and company store sales were up 13.5%.
Total company revenues, which include sales from company stores, franchise operations, and Krispy Kreme Manufacturing and Distribution (KKM&D), rose 28% to US$114.6m compared with US$89.5m in the prior year comparable period. Sales from the company stores were up 21.5% to US$74.7m; revenues from franchise operations grew to US$4.8m, up 48.5%; and KKM&D sales increased 41.4% to US$35.1m.
Net income for the H1 increased 52.3% to US$17.7m compared with US$11.6m in the same period last year. Diluted EPS increased to US$0.30 from US$0.20 year on year.
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By GlobalDataSystemwide sales increased 30% to US$370m from US$284.7m for the same period in FY 2002. This increase was a result of growth in franchise store sales of 36.1% to US$221.1m and a 21.9% increase in company store sales to US$148.9m.
Total Company revenues increased 27.2% to US$225.7m compared with US$177.5m for the same period in FY 2002. Sales from company stores increased to US$148.9m, a 21.9% increase; franchise operations increased 45.3% to US$9m; and KKM&D increased 38.0% to US$67.7m.
Scott Livengood, chairman, president and CEO, said: “This was another solid quarter which reflects a very focused execution of our growth strategy, which is to open stores, establish strong relationships with our customers and communities, and gain greater market penetration through multiple sales channels. The momentum … gives me great confidence for this year and the years to come.”
During the Q2, 12 new Krispy Kreme stores, including one commissary, were opened and one store was closed. This brings the total number of stores at the end of the Q2 to 233.
The company indicated that based on its performance in the H1 2003, it now expects to earn US$0.64 per fully diluted share or US$0.01 above consensus for the full year. Quarterly earnings guidance for the remainder of FY 2003 is as follows: Q3-US$0.16; Q4-US$0.18. The company anticipates systemwide comparable store sales of 10% for the year and Q3 expectations of 10%. Additionally, the Company increased store opening guidance by two stores to 64 stores in 15 new markets. Also, the firm expects to sign at least one additional franchise agreement for development of international markets in FY 2003.
Summary Q2 financial results
(All US$000s except per share data)
Q2 ended
4 August 29 July
2002 2001 $ Change % Change
Total revenues $114,626 $89,545 $25,081 28.0%
Operating expenses 90,487 72,683 17,804 24.5%
General and administrative expenses 6,589 5,966 623 10.4%
Depreciation and amortization
expenses 2,612 1,952 660 33.8%
Income from operations 14,938 8,944 5,994 67.0%
Interest income 592 825 (233) -28.2%
Interest expense 404 128 276 215.6%
(Income) Loss from joint ventures (18) 33 (51) -154.5%
Minority interest in consolidated
joint ventures 591 66 525 795.5%
Other expenses 150 — 150
Income before income taxes 14,403 9,542 4,861 50.9%
Provision for income taxes 5,545 3,627 1,918 52.9%
Net income $8,858 $5,915 $2,943 49.8%
Diluted earnings per share $0.15 $0.10 $0.05 48.5%
Diluted shares outstanding 59,047 58,457 590 1.0%
Segment Information
Revenues
Company store operations $74,744 $61,496 $13,248 21.5%
Franchise operations 4,774 3,215 1,559 48.5%
KKM&D 35,108 24,834 10,274 41.4%
Total revenues $114,626 $89,545 $25,081 28.0%
Operating Income
Company store operations $12,122 $9,422 $2,700 28.7%
Franchise operations 3,736 2,034 1,702 83.7%
KKM&D 6,060 3,808 2,252 59.1%
Unallocated general and
administrative expenses (6,980) (6,320) (660) 10.4%
Total operating income $14,938 $8,944 $5,994 67.0%
Operating Margins
Company store operations 16.2% 15.3% 0.9%
Franchise operations 78.3% 63.3% 15.0%
KKM&D 17.3% 15.3% 2.0%
Unallocated general and
administrative expenses 6.1% 7.1% -1.0%
Total operating income 13.0% 10.0% 3.0%
Depreciation and Amortization
Expenses
Company store operations $2,030 $1,472 $558 37.9%
Franchise operations 13 18 (5) -27.8%
KKM&D 178 108 70 64.8%
Corporate administration 391 354 37 10.5%
Total depreciation and amortization
expenses $2,612 $1,952 $660 33.8%
Systemwide Sales
Company stores $74,744 $61,496 $13,248 21.5%
Franchise stores 112,194 82,817 29,377 35.5%
Total $186,938 $144,313 $42,625 29.5%
Comparable Store Sales
Company stores 13.5%
Systemwide 12.8%
