Krispy Kreme beats off weather and charges

- Last updated on GMT

Related tags: Krispy kreme

A combination of poor weather conditions and a one-off charge
relating to an arbitration case involving one of its franchises did
little to dampen the financial performance at doughnut manufacturer
Krispy Kreme in fiscal 2003.

Krispy Kreme Doughnuts, the US doughnut maker which last year announced​ plans to enter the European market, has reported full-year figures for fiscal 2003 (to the end of February) which were impacted by one-off charges but which were nonetheless encouraging.

The charge of $9.1 million came after one of Krispy Kreme's current operators lost a lawsuit relating to the ownership of the franchise, but the company preferred to focus on its performance before the impact of the exceptional items.

Net income before the arbitration award increased 51.6 per cent to $39.1 million (€36.8m) for the year compared with $25.8 million a year earlier. Even including the arbitration charge, net income improved compared to the previous year, reaching was $33.5 million.

Sales for the year were up 28 per cent to $778.6 million, with company-owned store sales rising 22.5 per cent and franchised stores posting a 32 per cent increase. Total company revenues (which includes also the company's manufacturing and distribution business) were up 27.2 per cent to $491.5 million.

The company saw a particularly strong end to the year, with final quarter sales increasing 26 per cent. Scott Livengood, chairman, president and CEO of Krispy Kreme, said: "This has been a year of extraordinary weather patterns, from the unprecedented heat and drought of this summer, to the record levels of rain, ice and snow in many parts of the country in the fourth quarter. The volatile geopolitical climate of late has created additional uncertainties for most retail businesses.

"In light of these factors, I am extremely proud of the sales momentum we sustained in the fourth quarter. For the coming year, in the absence of these extreme conditions, I am confident we will return to a systemwide sales growth rate of approximately 30 per cent."

He continued: "Our fourth quarter results cap a year of very strong execution of our growth strategy. We opened a record number of stores and continue to gain greater market penetration through multiple channels of sales. Our fundamentals remain strong and every segment in our vertically integrated business model is performing at record levels. The strength of this momentum gives me great confidence for this year and the years to come."

The company opened 28 new Krispy Kreme stores during the fourth quarter in six new markets in spite of severe weather during January in Northern California, New England and Washington, DC. As a result, the company opened a total of 63 stores and two doughnut and coffee shops during fiscal 3002 and entered 18 new markets. The first location outside of North America, a commissary, in Sydney, Australia, also opened its doors during the year, and the pace of international expansion is now likely to accelerate. At the end of the year, the company​ had a total of 276 outlets.

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