Finance

Why Krispy Kreme is one of the few companies not worried about inflation

Customers and companies alike are getting nervous about soaring inflation — but Krispy Kreme (DNUT) is a notable exception.

CEO Mike Tattersfield told Yahoo Finance visits are “infrequent” enough that higher prices on its donuts is not driving customers away.

“The average user visits a Krispy Kreme two and a half times a year,” Tattersfield told Yahoo Finance in a recent interview.

When visitors do walk through the doors, “it’s about a celebration…it’s about a shared experience,” the executive added. Tattersfield emphasized that “pricing is not the number one feature” that brings someone in to order a dozen of Krispy’s sweet, rich treats.

The CEO suggested customers view the brand as a go-to for “celebratory occasions” a few times a year. That allows the company to score big on annual events like Halloween, Valentine’s Day, rather than “daily ritual” visits, which in turn provides the company with “pricing power.”

Tattersfield added: “We really absolutely maximize the opportunities when it’s around Halloween, when it’s around the holiday season, when it’s around Valentine’s Day…our number one day in the world.”

UNCASVILLE, CONNECTICUT – DECEMBER 19: People line up at the Krispy Kreme after the Basketball Hall of Fame Women’s Showcase at Mohegan Sun Arena on December 19, 2021 in Uncasville, Connecticut. (Photo by G Fiume/Getty Images)

The Charlotte-based donut giant, donut chain raised prices in September and November, which “more than offset wage and commodity inflation” according to the company’s fourth-quarter results. Tattersfield told Yahoo Finance the company plans to implement more price increases this year as inflation reaches a 40-year high.

In the fourth-quarter, which ended on January 2nd, 2022, the company saw an increase in revenue of 13.8% compared to a year ago, and a 23% surge in new revenue for all of 2021. Going forward, Krispy Kreme has plans to expand into grocers and convenience shops that will receive fresh orders on a daily basis.

Still, the brand has a long road ahead to return to pre-pandemic levels, according to data intelligence platform Placer.Ai.

On January 10th, 2022, Krispy Kreme’s foot traffic was down a whopping 17.54% compared to 2020, but only down 1.55% compared to 2021. As Valentine’s Day 2022 approached, Krispy Kreme saw that gap narrow to 14.21% compared to 2020. Yet when compared to 2021, foot traffic was down 9.35% that same week, suggesting the overhang of Omicron was still working against the brand.

One important note: in 2020, Valentine’s Day was on a Friday, while this year it was on a Monday. That suggests the traffic drop appears to be “more of a calendar shift than a change in consumer behavior,” according to RJ Hottovy, Head of Analytical Research at Placer.ai.

Hottovy also noted foot traffic was “more or less consistent with trends from the broader restaurant industry” as Omicron took a toll in the early part of the new year.

Shares of the company are down nearly 22% since its public debut on the Nasdaq back in late June of 2021.

Brooke DiPalma is a producer and reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.

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