Speaker 1: Speaking of expansions, do not makeer. Krispy Kreme is maintaining
Speaker 1: its full your outlook as margins improve, helping to offset
Speaker 1: lower revenue. CEO Josh Charlesworth says that the company is
Speaker 1: making continued significant progress on its turnaround and so pleased
Speaker 1: to say that Josh joins us now. Josh, great to
Speaker 1: see you. And look, it's clear this turnaround that you've
Speaker 1: been doing, focusing on having more franchise stores, it's working
Speaker 1: with your improved margins. How much more official operational efficiency
Speaker 1: do you think you can squeeze out or do you
Speaker 1: need to kind of refocus on getting that top line
Speaker 1: growth back.
Speaker 2: He's good morning, Great to see you. Yeah, the turnaround
Speaker 2: we announced a year ago is working, and you're right.
Speaker 2: We've seen margins improve this quarter three hundred and forty
Speaker 2: basis points. That's contributed also to us our ability to
Speaker 2: pay down their leverage. We're down one point three turns
Speaker 2: on that. But perhaps most important for the future, and
Speaker 2: to your point, is we're also seeing good underlying growth.
Speaker 2: If you exclude the business we exited last year, distribution
Speaker 2: at McDonald's, we actually grew four point four percent in
Speaker 2: the second quarter, which is a really good sign, and
Speaker 2: so I see going forward that will be able to
Speaker 2: continuous to improve the margins, like you say, but also
Speaker 2: at the same time grow the business because people want
Speaker 2: our donuts.
Speaker 3: Well. Again, on the margin side, I'm wondering if you're
Speaker 3: having any impact from all of the inflation that we
Speaker 3: have seen that are people worried about, and whether you
Speaker 3: feel you have any pricing power to make up for well.
Speaker 2: We've made a lot of operational improvements over the last year.
Speaker 2: We have, for example, outsourced our logistics that's the deliveries
Speaker 2: from our donut shops to our customers like Walmart, Target
Speaker 2: and the like, and outsourcing that has provided a lot
Speaker 2: of predictability and cost efficiency opportunities. We've also made sure
Speaker 2: that all our revenues are profitable, shifting to distribution that
Speaker 2: is more profitable than before, for example our fresh delivery
Speaker 2: channel that's the delivery to those grocery inconvenience stores. This
Speaker 2: sales per location are up weekly sales by thirty percent
Speaker 2: a year of a year, so we're able not just
Speaker 2: to address those cost pressures but improve the underlying profitability
Speaker 2: of the whole network.
Speaker 1: Have you seen any changes in consumer behavior? Josh I
Speaker 1: know when you talk about Krispy Kreme, you say, look,
Speaker 1: this is usually the treat that people go out for.
Speaker 1: Are they maybe buying that treat less often? Are they
Speaker 1: changing exactly what they're ordering? Are they opting for maybe
Speaker 1: more of a basic or a smaller package. Has anything shifted.
Speaker 2: In the consumer It's interesting in this dynamic consumer environment,
Speaker 2: we see that we are well positioned. As you say,
Speaker 2: it's because you're right, it's a resolutely infrequent purchase, just
Speaker 2: on average two to three times a year. Yours usually
Speaker 2: bought for sharing occasions, special occasions, and celebrations, and we're
Speaker 2: seeing that, you know, those fresh donuts are well well
Speaker 2: positioned in this market, and that explains I think the
Speaker 2: underlying growth. We've seeing people love our original glaze. It's
Speaker 2: our most popular and affordable product, usually brought in a dozen,
Speaker 2: and we're seeing even second dozen sales going up. And
Speaker 2: also we're bringing a ton of innovation that people get
Speaker 2: excited about. It's important for them to see our latest creations.
Speaker 2: It creates buzz and excitement for the brand, and we're
Speaker 2: seeing those perform well in our traditional channels and increasingly
Speaker 2: in the digital channel as well. So there's a lot
Speaker 2: of engagement around the brand in this environment.
Speaker 3: Have you felt any pressure to sort of match some
Speaker 3: of your competition and add products to your lineup?
Speaker 2: Well, you know, the number one reason why people say
Speaker 2: they may not purchase Krispy Kreme is where do I
Speaker 2: get it? I want to get those amazing fresh donuts,
Speaker 2: And so our focus is more about taking those fresh
Speaker 2: donuts that we make in our donut shops from scratch.
Speaker 2: You can actually literally see the doughe being prepared and
Speaker 2: the donuts being decorated in our shops. How do we
Speaker 2: get them to people more conveniently? And that's why we've
Speaker 2: been partnering with the likes of Walmart, Target also making
Speaker 2: them available online, and so that's where we see the
Speaker 2: growth opportunity really doing what we do best, make great
Speaker 2: fresh donuts.
Speaker 1: But Josh, the space is so hyper competitive, both dessert
Speaker 1: and bakery, whether it's your big chain competitors Duncan, Starbucks
Speaker 1: leaning into their breakfast and pastry offerings, or hyperlocal chains
Speaker 1: popping up, Crumble coming up. So kind of like the
Speaker 1: sweets and dessert things feel like they are kind of cyclical,
Speaker 1: that they have these moments and now feels like one
Speaker 1: of those moments, Josh, how do you compete with the
Speaker 1: old stalwarts of again, the Starbucks and the Duncans of
Speaker 1: the world, trying to compete more and competitors seemingly pop
Speaker 1: up every day.
Speaker 2: It's a combination of innovation and creativity bringing excitement to
Speaker 2: our customers. More than half our customer base is age
Speaker 2: under thirty five. We have eighteen million loyalty members. That's
Speaker 2: just for four hundred donut shops across the country, showing
Speaker 2: how engaging those people in the brand, engaging them in
Speaker 2: the new donut creations, whether they're seasonal variations or our
Speaker 2: cadence or limited time offerings. We did a fourth of
Speaker 2: July two hundred and fiftieth birthday donut collection was really popular.
Speaker 2: My favorite was the orange glazed Dreamsicle. We just tomorrow
Speaker 2: will launch our pumpkin Spice as part of our full collection.
Speaker 2: So we find that we're able to stay ahead of
Speaker 2: that competition by bringing what nobody else can do. Can
Speaker 2: I ask you quickly?
Speaker 1: We have like no time left, but what's the weirdest
Speaker 1: donut you guys have ever put out? I'm just listening
Speaker 1: to these like orange creamsicle. What do you think is
Speaker 1: the most strange donut you've ever put into.
Speaker 2: The market, so it's amazing what you can do with
Speaker 2: the doughnut. My favorite was the blueberry glaze that we
Speaker 2: just did. I don't think it's strange. I think everybody
Speaker 2: loves those traditional flavors, but sometimes, yeah, we do fun
Speaker 2: stuff as well.
Speaker 1: Yeah, blueberry glaze isn't strange at all, Josh. It does
Speaker 1: sound delicious though. I know where our stop will be
Speaker 1: after the show. Christphy Creme CEO, Josh Charlesworth, thank you
Speaker 1: so much for joining us.