Krispy Kreme revenue beats estimates as doughnut chain flexes pricing power

Doughnuts are sold at a Krispy Kreme store on May 05, 2021 in Chicago, Illinois.

Scott Olson | Getty Images

Krispy Kreme‘s third-quarter revenue climbed 18%, boosted by higher prices on its fresh doughnuts, helping the chain offset rising commodity and labor costs.

Shares rose more than 4% in extended trading Tuesday.

CEO Mike Tattersfield said in an interview that customers are willing to spend more on fresh doughnuts. In recent years, the company shifted its business to delivering doughnuts fresh every day to its stores. But its pricing power also comes from when people buy the treats.

“Because we’re a dozens business, we have a lot more flexibility in how we price,” Tattersfield said. “… We’re not a high frequency brand. People are still going to do celebrations, so they tend to look at the business like ‘Yes, I’d like to make sure we can have fresh doughnuts from Krispy Kreme.'”

Customers are also willing to pay up to 50% more for specialty doughnuts, Tattersfield said.

Krispy Kreme raised prices in September and plans to hike them further in the fourth quarter. Tattersfield declined to provide detail on how much more customers are paying.

For the fiscal third quarter ended Oct. 3, Krispy Kreme said its net loss attributable to the company narrowed to $5.7 million, or 4 cents per share, from a net loss of $14.9 million, or 12 cents per share, a year earlier.

Excluding items, the company earned 6 cents per share, in line with analysts’ expectations.

Net sales reached $342.8 million in the quarter, beating Wall Street’s expectations of $337.7 million, according to a survey of analysts by Refinitiv.

Excluding Krispy Kreme’s exit from the wholesale business, organic revenue climbed 14% compared with a year ago and 22% on a two-year basis. The company also owns cookie chain Insomnia Cookies.

Krispy Kreme reiterated its outlook for the rest of 2021. It’s forecasting net revenue of $1.34 billion to $1.38 billion and organic revenue growth of 10% to 12%. The company is also expecting adjusted net income of $62 million to $68 million.

This is the second quarter that Krispy Kreme has shared its results since returning the public markets in July. Since its initial public offering, the stock has tumbled 39%, giving it a market value of $2.18 billion. Shares closed Tuesday down more than 4%.