Krispy Kreme, one of the most popular doughnut chains in the United States, has now become a public company. As the stock price goes higher and higher, some financial experts are wondering if all the loved is deserved…
Krispy Kreme’s New Niche
Although the first Krispy Kreme opened back in 1937, it only went public in July of this year. And once it did, Krispy Kreme it big! That’s really no surprise, though, as the company managed to weather the coronavirus pandemic quite well. In fact, in 2020, Krispy Kreme’s sales grew by 17%, and they are still growing this year. In the second quarter of 2021, sales have grown another 22%! Meanwhile, Krispy Kreme has nearly 10,000 locations in more than 30 countries worldwide.
Why has Krispy Kreme done so well recently? Well, according to most experts, it’s their low prices! They still sell their doughnuts for less than 2 dollars in most local. As a result, the stock price quickly shot up to more than $20 a share. However, The Wall Street Journal and Seeking Alpha have both told buyers to expect the share prices to continue to grow.
However, not everyone thinks that Krispy Kreme has an excellent long-term plan…
While Krispy Kreme claims that 75% of orders are for a half or whole dozen doughnuts, investors have a more critical question: do the customers come back for them frequently? Unfortunately for the doughnut makers, that question remains unanswered. The difference between Krispy Kreme and the likes of Dunkin’ and Starbucks is that the latter are known for their coffee, something millions of Americans drink every morning. Since Krispy Kreme is not known for its coffee, there’s a far more likely chance for it to become an occasional sweet treat, as opposed to a regular part of their routine, like Dunkin’ and Starbucks.
Meanwhile, just because Krispy Kreme has low prices does not mean they will continue to grow. The market always demands stable income, and more successful quarters for companies’ stock prices to continue to grow.
The doughnuts company to these dilemmas? Lots of different types of revenue. Krispy Kreme has started partnering with more and more convenience stores, as well as creating a whole new line of boxed doughnuts for grocery stores. Additionally, the company plans to continue to develop new doughnuts, open new spots, and expand to more and more countries. All this, the brand hopes, will change the idea that Krispy Kreme is just a sweet treat to enjoy once in a blue moon.
Will it work? Only time will tell. However, for the time being, many investors want to see a more substantial long-term plan for Krispy Kreme. So, for now, some are warning against dipping your toes into the DNUT stock – and it’s easy to see why!
Sources: Investor Place MSN, The Motley Fool