Why Krispy Kreme Stock Plunged This Week

Core Viewpoint - Krispy Kreme's shares fell 32.2% following disappointing fourth-quarter earnings, a cyberattack, and cautious guidance for 2025 [1] Financial Performance - In Q4, Krispy Kreme reported revenue of $404 million, a decrease of 10.4$0.01, down 89%, both missing analyst expectations [2] - The company anticipates 2025 revenue between $1.55 billion and$1.65 billion, with adjusted EPS of $0.04 to$0.08, reflecting a decline from fiscal 2024's revenue of $1.67 billion and EPS of$0.11 [3] Guidance and Strategic Moves - The guidance accounts for the sale of the Insomnia Cookies brand, which will not contribute to 2025 revenue, and the company plans to refranchise more stores, expecting organic revenue growth of 5% to 7% [4] - Management highlighted a cautious consumer environment and external factors like California wildfires impacting the early 2025 outlook [5] Costs and Investments - Elevated costs are expected as Krispy Kreme addresses cybersecurity vulnerabilities and invests in a partnership with McDonald's, aiming for 6,000 locations by the end of 2025 and 12,000 by the end of 2026 [6] Market Position and Valuation - Following a significant decline since its IPO in mid-2021, Krispy Kreme shares are now valued at approximately 10 times enterprise value-to-EBITDA, based on projected adjusted EBITDA of $180 million to$200 million for 2025 [7] - Despite the low valuation for a growing franchise business, investors are advised to monitor management's handling of the cyber incident and the McDonald's partnership before making investment decisions [8]