WINSTON SALEM, NC. — A national rollout of Krispy Kreme doughnuts at McDonald’s restaurants is accelerating, but the company lowered its earnings guidance for 2024 and said it is restructuring management.

Josh Charlesworth, chief executive officer of Krispy Kreme, Inc., connected the restructuring to the sale of Insomnia Cookies and expansion of the company’s delivered-fresh-daily (DFD) business.

“Now well into my first year as CEO, we have streamlined and focused our business with the sale of our majority stake in Insomnia Cookies complete and the acceleration of our US DFD expansion underway,” he said. “To better align our talent and our capital to our business priorities, we are now restructuring our management teams to concentrate on maximizing our profitable expansion of the US while focusing international efforts on the wider adoption of our capital-light franchise model.”

During a Nov. 7 call with investment analysts, Charlesworth referenced the restructuring without specifying the management changes beyond bringing in a new team in the United Kingdom. He said management’s current priorities include driving consumer relevance, increasing points of access, increasing the efficiency of the company’s hub and spoke system, improving capital efficiency and boosting engagement of the Krispy Kreme team.

Krispy Kreme net income in the third quarter ended Sept. 29 was $39,563,000, equal to 23¢ per share on the common stock, compared with a loss a year earlier of $40,457,000. Sales were $370,662,000 down 7% from $398,745,000. Results in the current quarter included a gain of $87,128,000 in connection with the sale of a majority stake in Insomnia Cookies. The company’s operating loss in the third quarter was $16 million, up sharply from a $2.1 million loss the year before. Its adjusted net loss was $2.5 million.

After the earnings announcement, Krispy Kreme shares traded as low as $11 on Nasdaq Nov. 7, down 11% from the previous close, but rallied to close with a more modest price decline of 5%.

Adjusted for the sale of Insomnia Cookies, Krispy Kreme sales were up 3.5% in the third quarter.

DFD and digital sales both grew 15%, while the US retail and UK sales were soft, the company said. The company attributed a 160-point narrowing of its adjusted EBITDA margin, to 9.1%, to underperformance in the United Kingdom and “incremental vehicle accident claims costs” in the United States.

In the United States alone, EBITDA margin narrowed 250 basis points because of the accident claims costs as well as McDonald’s start-up costs. Partially offsetting the headwinds were “pricing and productivity benefits from the company’s hub and spoke model.”

Updating its guidance for the full year, Krispy Kreme projected net revenue of $1.65 billion to $1.685 billion and organic revenue growth of 5% to 7%. Both forecasts were unchanged from guidance revised in August. The company is projecting EBITDA for the year of $205 million to $210 million, down $10 million from August on both sides of the range, and earnings per share of 18¢ to 22¢, down 6¢ (a 21% cut on the high side of the range, 25% on the low side).

Asked about the guidance adjustment, Jeremiah Ashukian, chief financial officer, said the sales guidance was left unchanged, reflecting softer than anticipated sales at retail offset by an acceleration in in the company’s expansion into new sales outlets.

“The full year guidance on EBITDA was updated to reflect the impact of higher logistics costs in the quarter, our intentional decision to accelerate start-up costs” Ashukian said. “So, it’s a pull-forward versus anything unexpected.”

Ashukian attributed the higher logistics costs predominantly to the sale of Insomnia, though that transaction was completed several weeks before the last time Krispy Kreme issued guidance.

“I think it’s important to note that, you know, we are committed to continuing to drive a better business, we believe we'll return to operating leverage in the fourth quarter,” Ashukian said.

Charlesworth discussed several different aspects of the company’s expansion during the investor call, beginning with its “strong start” toward establishing a presence in more than 12,000 McDonald’s stores by the end of 2026.

“McDonald’s is supporting the launch with a comprehensive local marketing plan including TV, social media and out of home billboards,” he said. “We expect this increased visibility to benefit Krispy Kreme brand awareness as we expand to more cities across the country.”

He said the company added more than 150 Target stores to its DFD network in the third quarter and expanded its penetration in Walmart and Kroger as well.

“We’ve also started a promising US test of daily deliveries for a small number of Costco warehouses in southern California,” Charlesworth said.

Krispy Kreme said it has completed successful DFD pilots in the cities of Los Angeles and in Washington and on Oct. 9 issued a request for proposals for national and regional carriers to deliver daily the company’s donuts to grocers, convenience stores, quick service restaurants and other outlets.

“We believe this approach is aligned with our evolved strategy and the desire to focus on what we do best – making fresh melt in your mouth, donuts every day,” Charlesworth said of the strategy of using outside logistics providers.

Charlesworth also offered perspective on why margins are expected to improve as the company’s expansion progresses.

“Our US production network operates at about 25% utilization today compared to an optimum above 60%,” he said. “Nationwide DFD expansion gives us the opportunity to improve the capital efficiency of the existing production hubs. And we also plan to open new high-volume facilities with quicker paybacks in underserved markets like Minneapolis and Massachusetts.”

He said the company was “well on its way” toward adding 15,000 points of access in the United States by the end of 2026.