Krispy Kreme plunges 30% as company reconsiders McDonald’s partnership

Krispy Kreme shares tumbled 30% yesterday, May 8, to an all-time low, after the company gave investors several reasons for concern by pausing the rollout of its partnership with McDonald’s, withdrawing its full-year guidance for 2025, and suspending its quarterly dividend. On top of all this were weaker-than-expected first-quarter results.

Krispy Kreme shares crashed 30% yesterday, May 8, to $3 apiece, the lowest level since the company went public. With this plunge, the company’s market capitalization has declined 68.5% since the beginning of the year and 75.5% over the last 12 months.

The doughnut maker said Thursday it is pausing the rollout of its partnership with McDonald’s for the current quarter, citing macroeconomic headwinds and uncertainty around the joint project. CEO Josh Charlesworth told Bloomberg that the pause would help optimize marketing and simplify operations.

“With just a regional rollout so far, we’re seeing that demand drops off after the initial launch. That means we really need to work together to ensure that the brand awareness is there,” Charlesworth said.

Bloomberg reports that Krispy Kreme planned to sell doughnuts in 12,000 McDonald’s locations across the U.S. by 2026. As of the end of March, its products were already being sold in 2,400 McDonald’s restaurants. The company is also pursuing partnerships with other major retailers, including Walmart and Costco. For example, Krispy Kreme products have recently appeared in Sam’s Club stores, which are owned by Walmart.

Krispy Kreme withdrew its full-year guidance, citing a slowing economy and uncertainty about the future of the McDonald’s partnership.

The company also announced it is suspending quarterly dividends. The money will instead be used to reduce debt and invest in growth. Charlesworth said the dividend, paid since the company’s 2021 return to public markets, had long been under review. “We want to go after our growth opportunities and this gives us maximum financial flexibility,” he said. According to Bloomberg, scrapping the dividend will save Krispy Kreme about $6 million per quarter.

For the first quarter, Krispy Kreme reported a 15% year-over-year drop in revenue to $375.2 million. According to FactSet, Wall Street had expected $383.4 million, MarketWatch writes. The net loss nearly quadrupled to $33.3 million versus $8.5 million a year earlier. Free cash flow also turned negative, at minus $46.7 million.

For the second quarter, the company forecasts revenue of $370-385 million. Analysts had expected $395.9 million, MarketWatch adds. Krispy Kreme said it may close up to 10% of its unprofitable stores in the U.S. It currently operates 9,644 U.S. locations, accounting for 62% of its global footprint. 

“We are shocked by the speed at which the story fell apart,” said Truist Securities analyst Bill Chappell, as quoted by Bloomberg. He downgraded Krispy Kreme shares from “buy” to “hold.”

Citigroup analyst Jon Tower called the dividend suspension “not a great signal.” He said the partnership with McDonald’s “hit a speed bump,” and Krispy Kreme appears to be “most struggling” in the partnership given its declining revenue and earnings.