WINSTON-SALEM, N.C., USA – Krispy Kreme Doughnuts, Inc. reported on June 2, 2014, the financial results for the first quarter of fiscal 2015, ended May 4, 2014.
The Company also lowered its adjusted earnings per share guidance for the full year to a range of $0.69 to $0.74 from $0.73 to $0.79 per share.
First Quarter Fiscal 2015 Highlights Compared to the Year-Ago Period:
- Systemwide store count rose 3.3% since year end to 855 Company and franchise shops worldwide
- Systemwide domestic same store sales rose 2.3%; constant currency international franchise same store sales declined 2.2%
- Revenues increased 0.8% to $121.6 million from $120.6 million; excluding the effects of refranchising stores, revenues for the quarter rose 2.1%
- Operating income rose 6.6% to $16.2 million from $15.2 million
- Adjusted net income rose 12.2% to $15.8 million ($0.23 per share) from $14.1 million ($0.20 per share); adjusted net income and adjusted EPS reflect income tax expense only to the extent currently payable in cash; adjusted net income and adjusted EPS are non-GAAP measures (see the reconciliation of GAAP to adjusted earnings in the table accompanying this release)
- Net income was $9.7 million ($0.14 per share) compared to $8.0 million ($0.11 per share) in the first quarter last year
- Cash provided by operating activities was $13.7 million compared to $14.4 million in the first quarter last year
First Quarter Fiscal 2015 Results
Consolidated Results
For the first quarter ended May 4, 2014, revenues increased 0.8% to $121.6 million from $120.6 million. Excluding the effects of refranchising three stores in Kansas and Missouri and three stores in Dallas in February and July of 2013, respectively, revenues rose 2.1%.
Direct operating expenses were $95.2 million, representing 78.3% of revenues compared to 80.0% of revenues last year.
General and administrative expenses rose to $7.0 million from $6.1 million in the year-ago period, and as a percentage of revenues increased to 5.8% from 5.0%.
The increase in general and administrative expenses in the first quarter of fiscal 2015 reflects, among other things, approximately $400,000 of incremental expenses related to the implementation of a new enterprise resource planning system.
Operating income rose 6.6% to $16.2 million from $15.2 million.
Segment Results
With the exception of the first quarter last year, Company Stores’ profitability in the quarter was the strongest of any quarter in years. Revenues decreased 1.8% to $80.4 million from $81.9 million.
Exclusive of the effects of refranchising six stores in fiscal 2014, revenues increased 1.3%. Same store sales at Company shops declined 1.5% against an extremely robust gain of 12.2% in the first quarter last year.
The Company Stores segment posted operating income of $4.4 million compared to $5.3 million last year.
Domestic Franchise revenues increased 21.9% to $3.5 million, reflecting higher royalties, initial franchise fees and ancillary revenues, including rental income on stores leased and subleased to two franchisees in connection with the fiscal 2014 refranchisings.
Total sales by domestic franchisees rose 8.3%, of which approximately 1.9 percentage points reflects the fiscal 2014 refranchisings, while same store sales at Domestic Franchise shops increased 4.5%. Domestic Franchise segment operating income improved to $2.2 million from $1.4 million.
International Franchise revenues increased 2.1% to $6.6 million, driven by higher royalties. Sales by international franchise stores rose 3.9% to $115 million (5.9% excluding the effects of foreign exchange rate changes). Constant currency same store sales at international franchise stores fell 2.2%.
The International Franchise segment generated operating income of $4.3 million compared to $4.5 million. The decline in International Franchise segment operating income reflects continuing deployment of increased resources to support current and anticipated future international growth.
KK Supply Chain revenues (including sales to Company stores) rose 0.8% to $60.3 million. External KK Supply Chain revenues rose 5.7% to $31.1 million. KK Supply Chain generated operating income of $12.8 million in the first quarter of fiscal 2015, up from $10.2 million.
KK Supply Chain operating income in the first quarter of fiscal 2015 includes approximately $1.4 million of realized and unrealized gains on agricultural derivative positions, which increased adjusted earnings per share by $0.02.
Full Year Outlook
Based on first quarter results and other current information, management is revising its forecast of adjusted net income for fiscal 2015 to between $48 million and $51 million ($0.69 and $0.74 per share) from $51 to $55 million ($0.73 to $0.79 per share).
