Krispy Kreme stock plunged in early morning trading Thursday after the chain said it would slow down the expansion of its partnership with McDonald’s amid sales and profitability concerns.
The Charlotte, North Carolina-based chain sells its doughnuts in 2,400 McDonald’s locations and had planned to expand it to all of the burger chain’s restaurants. But Krispy Kreme said Monday that it wouldn’t add any new restaurants to that list this quarter.
“The company is reassessing the deployment schedule together with McDonald’s while it works to achieve a profitable business model for all parties and does not expect to launch in any additional restaurants in the second quarter of 2025,” Krispy Kreme said.
CEO Josh Charlesworth on the company’s earnings call Thursday said that sales were not meeting expectations. After the initial marketing launch ended, he said, “demand dropped below our expectations.”
He said the company is working to “increase sales and stimulate demand” at McDonald’s locations, but it is also looking to cut costs and streamline operations.
“It’s important to ensure we’re positioned for profitable growth as we expand and that includes McDonald’s,” he added. “We need to work together … to improve sales and simplify operations. Once we’re positioned for profitable growth we’ll expand further.”
Krispy Kreme added that it “continues to believe in the long-term opportunity of profitable growth through the U.S. nationwide expansion, including McDonald’s.”
The news sent Krispy Kreme stock plunging. The company’s stock fell as much as 27% in early morning trading on Thursday.
The news follows a particularly difficult quarter for the doughnut chain, which reported a 1% decline in organic revenue in the period. In the U.S., organic revenue declined 2.6%, even though the number of places consumers can buy Krispy Kreme doughnuts grew 35%. The company cited “expected consumer softness.”
Krispy Kreme said that its U.S. adjusted EBITDA, or earnings before interest, taxes, depreciation and amortization, declined 62.7%, while margins declined 770 basis points to 6.7%.
The company said that it suspended its quarterly dividends to provide “greater financial flexibility, enabling debt paydown and a focus on profitable, high-return growth.” The company also withdrew its full-year outlook, citing the economic softness and “uncertainty around the McDonald’s deployment schedule.”
“In this challenging macroeconomic environment, we are prioritizing paying down debt and positive cash flow and are pursuing only profitable growth based on sustainable revenue streams,” Charlesworth said.
Krispy Kreme operates a different model, which uses its doughnut shops as manufacturing plants that deliver doughnuts every day to kiosks and other displays at retailers and McDonald’s. A typical kiosk generates $400 in sales per week, but Krispy Kreme is also closing some less successful kiosks, particularly in regional retailers.
Krispy Kreme’s McDonald’s partnership, announced in 2023, was one of the most surprising industry partnerships in years. It gave the doughnut chain a reason to build more locations to serve the burger giant’s nearly 14,000 U.S. locations and generated a lot of attention.
Yet Krispy Kreme’s sales and earnings declines are putting more pressure on the company, which in April proposed a virtual overhaul of its own board of directors, including the addition of former Burger King CEO Bernardo Hees, who is known for cutting costs.
The company’s stock, meanwhile, has had serious challenges. It was down nearly 60% so far this year even before the decline on Thursday, which sent the stock down to just above $3 per share.
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