Krispy Kreme is making money like whoa (ish)

Krispy Kreme — which is interestingly based in Winston-Salem, NC (had no idea) — is expected to announce third-quarter earnings today. Sales are expected to rise 8.5%; the consensus idea had been 5.9%. Shares are trading at almost $26; that’s the highest level since mid-2004. The company has beaten sales estimates for four straight quarters, and the stock has increased 175% this year.

There was a dip earlier in the year and in years past — the former was primarily because of expansion costs, and the latter was because America, for a brief second, tried to be healthier — so Krispy Kreme responded with more smoothies, semi-healthy options, and a wider coffee selection to compete with the Dunkin’ brand (Krispy and Starbucks aren’t really as much competitors).

At the same time, the business plan is changing: it’s going to be more about smaller stores with less overhead; there will be less wholesale production. The new designs will be 2,300 square feet — down from 4K to 6K square feet for more wholesale-based locations — and can produce between 65 and 110 dozen donuts per hour, as opposed to the 150 to 600 dozen that the larger spaces could produce. The idea is that it’s easier for franchise partners to open new locations at the smaller space range; they want 157 more U.S. stores by 2017. There’s currently 243 stores or so in the U.S.

The brand is pretty strong — here’s a quick shot of 300 people waiting in the snow for Scotland’s first Krispy Kreme to open. They were being deeply profiled by NPR as far back as 2003, and the Krispy Kreme Challenge is celebrating its 10th anniversary this year. It has, indeed, been a sweet turnaround for the company. Its social media presence is littered with fairly glowing commentary such as:

Look, the health benefits obviously aren’t many. No one should be attempting to subsist primarily on Krispy Kreme donuts. If you do it once in a while as a perk-type thing, it’s a great indulgence; that should be the focus of their brand — that and a higher volume of smaller stores, so that consumers can get ’em hot in a variety of locations, as opposed to cold in a supermarket (still good, not the same context though). The brand can cause madness:

Some have even accused the brand of bordering on ‘addictive.’ (Here’s another take, with a nice mix of reality and sarcasm.) It’s also been the subject of numerous stand-up comedy bits. Here’s but one:

Stand back and appreciate the rise of Krispy Kreme (just, for the love of God, don’t eat it more than twice a month or so). In the next four years, you should be seeing almost 1.5x the number of stores — there’s a new one coming in Roanoke, VA and Anchorage, AK soon — so you’ll have greater access to the piping-hot, red-light goodness. Keep it all in perspective, and maybe grab a smoothie once in a while as you pass through. And hey, if you want to try it at home as a lark, check this out:

Ted Bauer

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