Krispy Kreme’s stock plunged by 24% on Thursday following the announcement that the company is halting its expansion into McDonald’s locations and retracting its full-year forecast. The doughnut chain cited a combination of economic pressures and underwhelming sales performance as key reasons for its decision. While initially optimistic about its collaboration with McDonald’s, Krispy Kreme revealed that the planned nationwide rollout will not progress in the second quarter. As of March 30, Krispy Kreme doughnuts were available in over 2,400 of McDonald’s approximately 13,500 U.S. restaurants. However, further expansion is now on hold. CEO Josh Charlesworth expressed confidence in the long-term potential of the partnership but emphasized the need to collaborate with McDonald’s to identify strategies that can boost sales performance.
The broader economic environment has been putting pressure on consumer spending, particularly in the restaurant sector. McDonald’s itself reported a 3.6% drop in U.S. same-store sales during the first quarter, with its CEO noting that fewer visits from middle- and low-income customers are contributing to a decline in traffic. Krispy Kreme, which uses a hub-and-spoke distribution model to deliver fresh doughnuts to various outlets, has struggled with profitability as it rapidly scaled up to support the McDonald’s rollout. These investments, aimed at increasing production and capacity, have contributed to mounting losses. The company posted a net loss of $33 million for the first quarter ending March 30 and has recorded net losses in three of the past four quarters.
Analysts are expressing growing skepticism about Krispy Kreme’s strategic direction, with Truist downgrading the stock from buy to hold and questioning management’s execution capabilities. The company is now focusing on simplifying operations, stimulating demand, and reassessing its rollout timeline in collaboration with McDonald’s. At the same time, Krispy Kreme is considering closing up to 10% of its U.S. locations that are not performing profitably. Adding to the uncertainty, the company has withdrawn its 2025 outlook, citing continued economic softness and a lack of clarity regarding its McDonald’s expansion schedule. This series of setbacks has pushed Krispy Kreme’s market valuation below $600 million, with shares losing more than 70% of their value over the past year.
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