Krispy Kreme is making a push to sell its donuts in more big-box retailers, convenience stores and supermarkets as the company struggles to regain its footing after a partnership with fast food giant McDonald’s abruptly ended.
Executives at the donut vendor are under pressure from Wall Street and investors to turn things around as its stock has dropped 73 percent from its yearly peak, signaling deep financial trouble, according to The Motley Fool.
Revenue for the quarter ending in June also slipped over 13 percent, with the company losing $441 million — compared to a $5 million loss during the same quarter last year, The New York Times reports.
A deal to sell their donuts at 2,400 McDonald’s chains across the country abruptly ended in June, after the retailer promised Wall Street and investors their donuts would be in 6,000 McDonald’s locations by the end of the year.
“For Krispy Kreme, the volumes fell off more quickly or meaningfully than they had expected, and part of the reason was that some of the marketing they had initially, some of the support from McDonald’s, seemed to peter out a little bit,” Sara Senatore, an analyst at Bank of America, told the Times. “They invested heavily ahead of the McDonald’s arrangement, and now they have to unwind that.”
A donut delivery program was also too expensive to take nationally, according to Motley Fool.
In the months after the McDonald’s collapse, Krispy Kreme took about $30 million in various impairment and termination costs related to the doomed partnership. The donut retailer also noted that the fair value of the chain had dropped more than $356 million.
To reduce expenses and slash its debt, Krispy Kreme says it plans to sell its international businesses in other countries to other franchisees. It also plans to start using third-party logistics firms to oversee deliveries.
“It’s one thing to manage three or four trucks,” chief executive of Krispy Kreme Josh Charlsworth told the Times, noting as business expanded, managing the fleet of trucks became more complex.
In the U.S., Krispy Kreme hopes to make a comeback by getting more of its donuts into big-box stores, such as Costco, Kroger and Walmart.
“In the U.S., just to give an example, we’re in less than a third of the footprint of Walmart, and so, you know, there are thousands of locations for us to go after,” Charlesworth said.
While some Wall Street analysts say the brand is making its donuts too readily available, Charlsworth says there are plenty of places throughout the U.S. where fans can’t get a donut even if they tried.
“When we ask consumers who have not purchased a Krispy Kreme, the top response on the list is, ‘I can’t get them,’” Charlesworth said. “The availability has long been the No. 1 barrier to purchase.”
