Analyst Will Slabaugh of Stephens Inc. says Krispy Kreme Doughnuts’ (KKD) recent pullback has made it more attractive, as the company is experiencing high new unit returns and is expected to become even more profitable than it has been historically.
“This is a company that went through a boom and bust back in early 2000s. It had a good year last year where the stock more than doubled, but it has pulled back recently and become increasingly attractive. Some observers are worried that same-store sales growth is going to turn negative after being in double-digits for much of last year, and our channel checks indicate that that is not the case,” Slabaugh said.
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Slabaugh points to Krispy Kreme’s continued positive sales trajectory and management’s new growth plans as drivers behind the company’s future profitability.
“The new unit returns are fantastic and near industry highs. I think Chipotle is the only one with better new unit returns than Krispy Kreme at this point. In short, the management team is putting a very new, smarter way of growth into place, and I think it is going to make for a much more profitable company for shareholders than it has been historically,” Slabaugh said.
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