Krispy Kreme Doughnuts (KKD) Needs to Wake Up and Smell the Coffee

Less than five years ago, Domino’s Pizza, Inc. (NYSE:DPZ)’s was mainly an 80%-90% delivery business, but today over 30% of sales are pickup. As far as desserts go, its Lava Crunch Cake, introduced in 2009, gives people another reason to visit the chain. The goal should be to get people in the doors, and add-ons like dessert can only improve margins and help the bottom line. Global revenue and domestic sales increased 8.6% and 7.8%, respectively, for the first quarter of 2013. Net income soared up nearly 66% due to same store sales growth, international store count, and improved margins.

Wake up

Krispy Kreme is at its highest share price in eight years. However, it still has over halfway to go to reach its peak share price of a decade ago. Its 700+ locations, stubborn menu, and business philosophy doesn’t look like it can support its growth rate and the high expectations the P/E of 60 demands. Perhaps it is time for it to evolve. The population has a healthier mindset and doughnuts might not be so attractive now. Expand the menu and give people another reason to visit a store besides to pick up a dozen doughnuts while holding a rival company’s meal or beverage. Wake up and smell the coffee Krispy Kreme — maybe even taste it too.

Michael Carter has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

The article Krispy Kreme Needs to Wake Up and Smell the Coffee originally appeared on Fool.com and is written by Michael Carter.

Michael is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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