Krispy Kreme Q1 Earnings Call Highlights

Key Points

• Krispy Kreme says its turnaround is gaining traction via refranchising, cost controls and lower capex, with first-quarter results showing a 38% rise in Adjusted EBITDA to $33.1 million, the first positive Q1 free cash flow since its IPO, and net leverage down to 5.5x with liquidity over $300 million.
• The growth strategy emphasizes profitable U.S. expansion by better using under‑utilized production capacity (~25% network utilization) and capital‑light international franchise growth, targeting more than 100 shop openings this year and a goal of 50% franchisee‑generated system sales by 2027 while entering 3–4 new markets including the Netherlands.
• Management reiterated 2026 targets including net revenue $1.25–1.35 billion, Adjusted EBITDA $140–150 million, capex $50–60 million, >$15 million in positive free cash flow, and system‑wide sales growth of 2–4% (to over $2 billion) with net leverage expected below 5.5x.

Krispy Kreme NASDAQ: DNUT executives said the company made “significant progress” during the first quarter of 2026 as it continued executing a turnaround plan focused on deleveraging its balance sheet and driving “sustainable, profitable growth.”

Speaking on the company’s first-quarter earnings call, President and CEO Josh Charlesworth highlighted two primary growth priorities: “profitable U.S. expansion and capital-light international franchise growth.” Chief Financial Officer Raphael Duvivier said results were supported by “disciplined execution of the turnaround plan,” including cost controls, refranchising activity, and reduced capital expenditures.

Turnaround plan centers on refranchising, cost reductions, and U.S. door growth

Charlesworth outlined four pillars of the turnaround plan:

• Refranchising
• Improving returns on capital
• Expanding margins
• Driving sustainable, profitable U.S. growth

On refranchising, Charlesworth said the company completed two transactions in March that contributed to reducing net debt. In Japan, Krispy Kreme reached a refranchising agreement with Unison Capital, which Charlesworth described as “an experienced operator in the retail restaurant sector.” He noted Krispy Kreme has operated in Japan for 20 years, with “approximately 90 shops and 300 fresh delivery points of access.”

Charlesworth said Japan is “the first of the 2-3 international refranchising deals we are targeting in 2026.” He added that as the company evaluates other markets, it remains focused on finding the “right partners to maximize value and position our brand for long-term growth.”

The second transaction reduced the company’s ownership in its Western U.S. joint venture to a 20% minority stake with long-standing partner WKS Restaurant Group. Charlesworth said the WKS franchisee operates “more than 70 shops across the Western U.S.” and has agreed to develop new shops and expand the fresh delivery footprint.

International shop openings and new market plans

Charlesworth emphasized that a greater share of sales is expected to come from franchisees following the recent refranchising moves. He said franchisees generated about 25% of system-wide sales last year, but after the first-quarter transactions, the expected share “has increased to 42%,” reflecting progress toward a goal of reaching 50% of system-wide sales generated by franchisees entering 2027.

On development, Charlesworth said the company is projecting “more than 100 shop openings this year, nearly all through franchisees.” During the first quarter, Krispy Kreme opened 26 shops globally. He also pointed to progress in Brazil, where the company marked its first anniversary in April and opened its second Hot Light Theater shop in São Paulo.

Charlesworth said the Krispy Kreme system now includes “more than 2,100 locations, both company owned and franchised, across 42 countries.” He added the company expects to add “three to four new markets” in 2026, including the Netherlands. The first Hot Light Theater shop in the Netherlands is expected to open in late 2026 and serve as a retail shop and production hub, anchoring “a broader phased expansion to approximately 30 shops across the country over the next five years.”

U.S. operations: capacity utilization, logistics outsourcing, and demand drivers

In the U.S., Charlesworth said the company is prioritizing growth through leveraging existing production capacity more efficiently, noting network utilization is “only about 25%.” He said Walmart and Target and other strategic partners remain “meaningfully under-penetrated,” with existing facilities currently delivering to more than 7,400 fresh doors nationwide.

On margins and execution, Charlesworth said the company has been simplifying operations and reducing costs across the P&L, delivering “a significant margin improvement in the first quarter,” led by an increase in the U.S. segment. He attributed U.S. efficiency gains to improved production planning, labor optimization, streamlined hub operations, and better route management and demand planning.

Charlesworth also said the company completed the transition of its U.S. fresh delivery network to third-party logistics partners in April, “ahead of schedule.” He said outsourcing provides “greater cost predictability and reduced operational risk,” and the company expects the benefits to offset the impact of recent increases in fuel prices.

On demand and growth initiatives, Charlesworth said the company has now returned to growth over the last two quarters following a door optimization completed in the third quarter of 2025. He said Krispy Kreme added “over 250 higher volume, higher margin doors” in the first quarter with partners including Publix, Sam’s Club, and Target, and also launched in Jewel-Osco, part of Albertsons.

Charlesworth highlighted Original Glazed and dozen sales trends, limited time offerings tied to seasonal and cultural moments, and the growing digital channel. He said the company had “record sales” for both Valentine’s Day and St. Patrick’s Day, and also cited strong demand for the Artemis II Doughnut tied to NASA’s deep space crew mission, prompting the company to extend the promotion beyond an initial three-day plan.

Digital represented 23% of U.S. retail sales in the first quarter, Charlesworth said, and the loyalty program has “over 17 million members.” He also discussed consumer research related to GLP-1 and other weight loss medications, saying the company found consumers who identify as users of these medications are “just as likely as non-users to purchase sweet treats for holidays and special occasions,” with a focus on quality and taste.

First-quarter financial results: revenue down, profitability up, leverage improved

Duvivier reported first-quarter 2026 net revenue of $367 million, down 2.2% year-over-year, which he said reflected the strategic closure of underperforming doors completed in the third quarter of 2025. System-wide sales were $485.3 million, increasing 0.7% in constant currency, excluding sales attributed to the now-ended McDonald’s USA partnership.

Adjusted EBITDA rose 38% year-over-year to $33.1 million, which Duvivier said was driven by productivity initiatives and corporate cost control. He said it marked the third consecutive quarter of year-over-year Adjusted EBITDA growth.

Duvivier also said the company generated free cash flow in the quarter, calling it “our first positive free cash flow in a Q1 period since our 2021 IPO,” aided by lower capital expenditures and improved working capital management.

At quarter-end, Duvivier said the net leverage ratio improved 1.2x quarter-over-quarter to 5.5x and was down 2x since the company announced its turnaround plan in August of the prior year. He added liquidity increased to more than $300 million and that bank leverage is now below 4x, lowering the interest rate on the primary credit facility by 25 basis points.

Segment results included:

• U.S.: Organic revenue declined 4% year-over-year due to door closures, while average weekly sales rose to $685, up 16.7% year-over-year. U.S. segment Adjusted EBITDA increased 61% to $25.5 million, with a 480 basis point year-over-year margin increase.
• International: Organic revenue increased 0.4%, primarily due to Canada and Mexico. International segment Adjusted EBITDA declined 2.9% to $14.5 million, which Duvivier attributed to the refranchising of Japan in early March.
• Market Development: Organic revenue declined 4.3% as higher royalty revenues were more than offset by lower equipment sales. Segment Adjusted EBITDA rose 5.3% to $11.6 million, while margin decreased 60 basis points to 57.5% due to product sales mix.

Updated 2026 outlook includes revenue, EBITDA, capex, and free cash flow targets

Management reiterated expectations for system-wide sales growth of 2% to 4% in constant currency in 2026, to over $2 billion, which Charlesworth said would be driven primarily by international expansion. He also said the company anticipates U.S. growth in the back half of the year as it laps the now-ended McDonald’s partnership, which the company exited last July.

Duvivier provided full-year guidance ranges that include the impact of refranchising transactions already completed, but not future transactions. The company expects:

• Net revenue: $1.25 billion to $1.35 billion
• System-wide sales: up 2% to 4% in constant currency from $1.96 billion in 2025
• Adjusted EBITDA: $140 million to $150 million
• Capital expenditures: $50 million to $60 million (about a 50% decrease from last year)
• Positive free cash flow: more than $15 million
• Net leverage ratio: below 5.5x

In the Q&A, asked how additional international refranchising could affect guidance, Duvivier said the company would update guidance as more deals are completed. Separately, responding to a question about U.S. consumer trends, Charlesworth said demand remained strong, pointing to Original Glazed dozens supported by second dozen promotions and strong performance in “gifting and sharing moments,” while noting weather disruption in January in the U.S. Southeast.

Charlesworth closed the call saying the company is “confident in the foundation” being built for the next era of growth and plans to continue executing the turnaround plan throughout 2026.

About Krispy Kreme NASDAQ: DNUT

Krispy Kreme Doughnuts, Inc NASDAQ: DNUT is a global retailer and wholesaler renowned for its signature Original Glazed doughnut and a variety of other sweet treats. The company operates through a combination of company-owned stores, franchise outlets and strategic partnerships with supermarkets, convenience stores and other foodservice channels. In addition to its doughnut portfolio, Krispy Kreme offers freshly brewed coffee, assorted beverages and proprietary seasonal items designed to drive traffic and foster brand loyalty.

Founded in 1937 in Winston-Salem, North Carolina, by Vernon Rudolph, Krispy Kreme has grown from a single local shop to a multinational brand.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.