Krispy Kreme profit off, adjusted profit tops view

WINSTON SALEM, N.C. -Krispy Kreme Doughnuts Inc. said Monday that its first-quarter profit fell 34 percent, pulled down by the effects of income tax changes.

But the company's adjusted earnings beat Wall Street expectations and it issued a sweet full-year profit prediction, sending its shares up more than 8 percent in morning trading.

For the quarter ended April 29, the Winston Salem, N.C.-based doughnut chain reported net income of $6 million, or 8 cents per share, down from $9.2 million, or 13 cents per share, in the same quarter last year.

The recent quarter's results reflect a book tax rate of 43 percent, compared with a rate of 3 percent in the same quarter last year, as a result of the required reversal of valuation allowances on deferred tax assets in the fourth quarter of fiscal 2012.

Excluding the impact of the tax adjustment, the company said it posted an adjusted profit of $10.3 million, or 14 cents per share, for the recent quarter.

Revenue rose 3.7 percent to $108.5 million from $104.6 million, as revenue at company owned stores rose 5.6 percent to $73.3 million.

Analysts, on average, expected adjusted earnings of 10 cents per share on $111.4 million in revenue, according to a FactSet poll.

Krispy Kreme said its revenue at company owned stores open at least a year increased 2.1 percent, boosted by increases in both customer traffic and pricing. The metric is a key measure of a retailer's health, because it excludes sales at stores that opened or closed during the year.

Domestic franchise revenue grew 11.1 percent to $2.6 million, while international franchise revenue rose 6.9 percent to $6 million.

The company said it expects its fiscal 2013 profit to total between 21 cents and 24 cents per share, or 35 cents to 41 cents per share after adjustments. Analysts polled by FactSet expected an adjusted fiscal year profit of 30 cents per share.

Krispy Kreme shares rose 49 cents, or 8.1 percent, to $6.50 in morning trading. They are still 35 percent below their 52-week high of $10.08 late last June. They fell as low as $5.78 per share in October.