Krispy Kreme Doughnuts (KKD): Finding Strength in Doughnuts

In the coming months, new beverage offerings will be released to complement the conventional food products. Up to this point, the company has lacked the beverage menu of its competitors. Should Krispy Kreme Doughnuts (NYSE:KKD) begin to offer beverages similar to Dunkin’, expect to see Dunkin’ lose some of its traffic as a result. In addition, Krispy Kreme Doughnuts (NYSE:KKD) should see rising profit margins as typically breakfast beverage offerings carry over 75% profit margins due to very low input costs. Falling coffee costs should continue to help beverage margins for the entire industry in applicable future.

Krispy Kreme Doughnuts (NYSE:KKD) has altered its expansion plans to include more efficient smaller outlets. The freestanding factory stops will have the full doughnut-making capability of traditional stores, but are substantially smaller than a traditional doughnut factory. The company plans to open 8 more of these locations later this year in addition to the 10 franchise agreements set to open as well. Internationally, the company is set to expand both in existing and new markets such as Taiwan and Moscow. There are currently 360 shops in the international pipeline, and management has made it clear it will make progress in Europe and South America in the years ahead.

Conclusion

Management has made substantial progress so far this year. Executives have developed a plan to grow market share and earnings for years to come through a combination of marketing campaigns, store growth, menu growth, and product innovation. I fully expect consumers will respond well to the new initiatives and the company will steal market share away from its main competitor Dunkin’ Brands.

Nathaniel Matherson has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

The article Finding Strength in Doughnuts originally appeared on Fool.com.

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