Krispy Kreme and McDonald's will end their doughnut partnership. Analysts were betting on it

Doughnut maker Krispy Kreme will stop selling its products in McDonald's restaurants in the US in early July. The partnership, which analysts called a key growth driver for the confectionery company's shares, turned out to be unstable and short-lived, and it also failed to meet investors' expectations: Krispy shares are down 74% since the beginning of the year.

Krispy Kreme will stop selling its doughnuts at McDonald's restaurants: the agreement between the two companies will end on July 2, according to a announcement on the doughnut chain's website. 

"Our two companies worked closely together to support execution, marketing and training, delivering a great customer experience in approximately 2,400 McDonald's restaurants. Ultimately, attempts to align our costs with unit demand were unsuccessful, making the partnership unsustainable for us," said Krispy Kreme CEO Josh Charlesworth, he was quoted as saying in a company statement. 

The collaboration was going well for McDonald's and its franchisees, but "it also had to be a profitable business model for Krispy Kreme," McDonald's USA director of marketing and customer experience Alyssa Buetikofer noted in a presentation to CNBC.

Krispy Kreme said it will now focus on expanding through "major retail locations" and developing an international franchise network. The company said it represented only a "small, inconsequential" part of McDonald's breakfast business.

The goal of the merger, which was announced in March 2024, was to sell Krispy Kreme doughnuts at McDonald's locations. Krispy Kreme hoped the deal would more than double its distribution network by the end of 2026.

In November 2024, Morgan Stanley analysts predicted that selling Krispy Kreme doughnuts at McDonald's restaurants would help the confectionery company's stock rise 18%. Analysts at investment bank Piper Sandler called the agreement a "game changer" after it was finalized and raised Krispy's rating from neutral to "above market" (Overweight) at the time.

Investors didn't buy the story too much, however: Krispy Kreme shares are worth 74% cheaper now than they were at the start of 2025. In May, the companies suspended the partnership after a slowdown in doughnut sales. Krispy Kreme then revoked its full-year financial outlook and announced it would stop paying a quarterly dividend due to the economic "weakening."

For the first quarter, Krispy Kreme reported that its revenue fell 15% year-on-year to $375.2 million. Wall Street had expected more - $383.4 million, noted MarketWatch, citing FactSet data. Net loss nearly quadrupled to $33.3 million from $8.5 million a year earlier. Free cash flow was also negative - minus $46.7 million.

Shares of Krispy Kreme were falling by 3% at one point during trading on Tuesday, but then recovered their losses and were losing only 0.2% of their value by the time this text was published. McDonald's securities added about 0.6%. Compared to the beginning of 2025, the shares of the burger chain are now only 0.5% more expensive.

The Wall Street consensus target price for Krispy Kreme shares is $6.7, according to MarketWatch - that's more than double their current value. Shares of McDonald's are also trading below analysts' average target price by 14%.

Five of the eight analysts tracking the candy chain's stock recommend Hold. Two of them advise Buy and one of them advises Sell. As for McDonald's, more than half of the analysts (20 out of 37) advise holding the stock, 16 advise buying (Buy and Overweight) and only one advises selling.

This article was AI-translated and verified by a human editor