Shares of Krispy Kreme, Inc. (NASDAQ:DNUT) dropped around 5% on Thursday after the company reported a deeper second-quarter loss than analysts had forecast, as it works to recover from the end of its collaboration with McDonald’s (NYSE:MCD) and embarks on a broad restructuring strategy.
For the second quarter, the doughnut chain posted an adjusted loss of $0.15 per share, far wider than the expected $0.04 loss, signaling the financial strain caused by the terminated McDonald’s partnership.
While quarterly revenue slightly beat expectations—$379.8 million versus the projected $378.66 million—it still marked a 13.5% drop from the same period a year ago. On an organic basis, revenue fell 0.8% year-over-year.
Krispy Kreme’s financial results took a hit largely due to the conclusion of its partnership with McDonald’s USA, which officially ended on July 2. The company incurred non-cash goodwill and asset impairment charges amounting to $406.9 million, leading to a GAAP net loss of $441.1 million.
“Our results for the second quarter primarily reflect the impact of unsustainable operating costs relative to unit demand in the McDonald’s USA partnership,” said CEO Josh Charlesworth.
“We are quickly removing our costs related to the McDonald’s partnership and growing fresh delivery through profitable, high-volume doors with major customers.”
Adjusted EBITDA plunged 63.3% to $20.1 million, with profit margins narrowing sharply to 5.3%, down from 12.5% a year ago.
Despite financial headwinds, Krispy Kreme expanded its global points of access by 14.3% to 18,113, although that figure includes roughly 2,400 McDonald’s locations that closed after the quarter ended.
As part of its turnaround strategy, the company is focusing on:
- Refranchising international markets
- Improving return on invested capital
- Expanding margins through operational efficiencies
- Driving steady growth in the U.S.
To reduce debt, Krispy Kreme recently sold its remaining stake in Insomnia Cookies for $75 million and suspended its quarterly dividend.
In line with its restructuring efforts, the company is exploring the reduction of its ownership interest in a Western U.S. joint venture and has launched refranchising initiatives in Australia, New Zealand, Japan, Mexico, and the UK.
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