Krispy Kreme Falls, Despite Positive Conference Call

reported its Q3 earnings on Tuesday. Shares of the company are down 8 percent. Below are some key highlights from its conference call.

• For the quarter ended November 2, total revenues rose 8%, adjusted EPS increased 13%, while cash provided by operating activities grew 33%. We demonstrated progress in executing on a number of our goals, although we have some fine-tuning to do in a few areas. • Systemwide domestic same-store sales rose 3.7%, including a 3.3% increase at company shops and a 3.9% increase at franchise shops. • Customer traffic, which is the lifeblood of any retail business, rose 5.7% on a same-store basis at company shops, compared to 0.8% in the second quarter. • We continue to expand the number Krispy Kreme shops around the world as our Systemwide unit count grew 4.6% during the quarter and 11.7% year-to-date. • Our goal is to pace our new shop openings in a prudent, sustainable manner as we capitalize on the huge growth opportunity in front of us. • Domestically, our latest forecast is that we will have approximately 30 new shop openings this year, including both company and franchise shops, which implies about 12 new shops in the fourth quarter, virtually all of which are expected to be freestanding factory shops. • We believe the sure sign of confidence in our brand is new franchisees signing up and existing franchisees opening more shops. • We have several in the Southeast with franchise agreements dating from the early 2000s that expire between 2018 and 2023. • We have a strategic interest in getting these franchisees renewed well in advance of the expiration dates for two main reasons. • We originally estimated 85 gross openings this year. • Through the third quarter, we had 94 openings as year-to-date development exceeded our expectations and we expect more new shop openings in the fourth quarter. • Our research suggests that Krispy Kreme coffee and other beverages need to have a higher top of mind consumer awareness, so we are taking steps to achieve that.

• Total revenues rose almost 8% in the quarter to about $123 million, operating income was $12.9 million compared to $11.7 million last year, and adjusted earnings per share were $0.18 versus $0.16 in the third quarter last year. • In the Company Stores segment, total revenues rose over 10% to $83 million. • Excluding the net effect of acquiring and selling shops in transactions with franchisees, sales rose about 6%. • Same-store sales at company shops rose 3.3%. • The Company Stores segment posted operating income of $2.2 million compared to $2.6 million in the third quarter last year. • Third quarter revenues rose about 8% to $3.3 million. • Our domestic franchisees same-store sales rose 3.9% despite being up against a challenging 11% comp they posted last year. • Adjusted net income was $12.1 million, $0.18 a share, compared to $11.2 million or $0.16 a share in the third quarter last year.