Krispy Kreme (DNUT) 15 Nov 222022 Q3 Earnings call transcript

Hello, my name is Lisa, and I will be your conference operator today. At this time, I would like to welcome everyone to the Krispy Kreme Third Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions]

to call like to now would turn over the Mr. I Head of Ballew, Investor Rob Relations. ahead. go Please

morning. Good you. third Thank us earnings Kreme’s and quarter call. this joining for Thank you everyone, XXXX morning, welcome to Krispy

are Our third quarter website the release and our Relations of investors.krispykreme.com. available presentation portion accompanying Investor at on earnings earnings deck

Chief prepared Joining me Executive morning Financial Josh by Global Charlesworth, this and Officer; be Josh, Operating Officer; Tattersfield, there and After Mike a on is the Accounting Joey and Mike question-and-answer Pruitt, President, remarks call Chief President Officer. Chief will and session.

begin, like the statements financial future events the I safe Before Act Securities you performances. we to forward-looking of expectations, of provisions Reform would including Private that contains this XXXX, future call harbor pursuant or and remind made statements Litigation to of

statements. statements these the differ Forward-looking investors from in caution risks a SEC results inherent described XX-K risks to XXth this in actual on forward-looking in of year. factors involve and contained the materially filed of detail and we uncertainties, company's and uncertainties number These risks those and are cause March other could that any

made today assumes obligation any as publicly of speak today. no required revise as The forward-looking update company or may except only to statements, be statements law. Forward-looking by

financial investors.krispykreme.com. and release be and available call found press SEC in be XX-Q, can A Additionally, third measures include reconciliation XXXX shortly closest Form non-GAAP earnings furnished today's measures GAAP and the which measures. the certain will between at their to non-GAAP financial our quarter will company's

to turn that, the I'll With over Mike. call

us joining for everyone you thank and morning Good today.

growth successful was bolstered third our quarter strategy. execution driven by to by share accelerating results, XXXX are continued our which pleased omni-channel of a were that organic We

in another and your call want growth will by Krispy dedication, driving had country not our be despite a environment. start revenue to today's Language]. Without around efforts possible team macro quarter tough positive world, of growth members organic we every [Foreign the for thanking strong where Kremers, I our this

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We a drive impactful create brand are these like company highlight in really to consumer our the help can proud countries way. operating campaigns in we how be we global and with and an over connections joy genuine XX

our omnichannel up drive lot XX% Turning sold in the XXX Total of quarter year of prior growth demonstrated the XX% points million or during to from to terrific over than roughly revenue by organic donuts, year. donuts. model more this year long-term and a was a a in performance. global of donuts to from globally ago X% that’s made third on We our the ago progress our led strategy quarter, access

Japan. well Mexico, Zealand and U.S. We saw as equity our Cookies, in strong performance robust performance development, New as and in Insomnia and in market Australia with in including Hubs on the Spokes a

Insomnia from ago. driven of to basis a year up much year Krispy mix of XX.X% led The sales, XXX basis from Kreme to XXX e-commerce retail the strong which the saw by by grew growth points e-commerce also points U.S., addition sales, XX.X% a a in and was robust which combined ago. Cookies growth In performance, was DFD represented

E-commerce of dark of donuts app. and was specialty availability delivery our growth driven shops by addition mobile aggregators, with the an on our improved partnerships radius expanded through third-party

we While much the our continue to significant years. progress in see has to coming platform been e-commerce made, upside

a significant Our and U.K. market environment led overall the energy U.K. traffic general impacted We've continues to by retail soaring pressures. see consumer supermarket challenged in and in inflationary to costs declines

our by of adjusted EBITDA U.S. Difficulty] strength dollar and [Technical results, reducing million. the net our the reducing to in quarter growth the continues Additionally, impact approximately $X.X including our revenue by

the operating declined environment. promotional due $XX.X the but activity profit organic activity quarter, has and our of September, first EBITDA the promotional in In to which FX global growth, adjusted quarter Despite million, two U.S. reduced challenges modestly to to significantly significantly revenue we higher on we've in U.K. Strong without the revenue, gross since trends. any months led impact improved ran the

driven by per in Hubs the quarter, highlighted of revenue total grew growth by Spokes, third In sales our Cookies, increase growth Insomnia and segment, same-store by Canada was performance revenue. led while grew Organic in revenue the another the strength in with double-digit U.S. by XX%. and e-commerce sales Hubs our X%

Our momentum access addition large partners. continue potential see from we DFD strong business regional two to of partners, gain and with higher interest the of continued to points

on as we'll our treats. omnichannel DFD, our through run with also multiple simultaneously Spice Pumpkin across a Thanksgiving also and and channels during was then, e-commerce premium using premium similar Since a LTO retail, price Halloween We've launched which we've LTOs branded to August, be Winter the execution continued approach successful well. strengthen Holidays sweet and

both XX% successful with which premium to more are to Cut in and drive Hand profitable in more four sales. LTOs add love our innovate and Sundays, addition our premium premiumize of newer of to than products price launch brand tier can Glazed These our Roll Cinnamon to which and the Fridays point, Fritter buzz recent original doughnut. continue be really innovative to We

the U.S. promotional and offsetting loss margin our Canada international quarter, third the including XX% market, Hubs quarter of those the performances EBITDA in international by with in Mexico, strong with growth and In increases growth increased robust development, revenue and and organic led countries, Adjusted Japan. all market activity in Australia higher in had Spokes. in in organic third price the our in positive

our Additionally, -- with in a also successful growth had a there organic positive despite U.K. and quarter the with omnichannel modestly ago coping cycling LTO consumer business year sentiment tremendous decades. a worst

Halloween ability is our really and celebratory we the you One strong relevant across omnichannel confidence in most markets consumers complement with as thing occasions, our our markets, When see that Minions brand. with gives globe, our like challenging succeed in with they maximizing brand us reach are. wherever partners we that model strong engagement products, to doughnuts recent the

that sales Roughly, system Krispy of outside half wide global Kreme our adjusted is loved the a truly U.S. EBITDA proving brand. are and

As know, is to year forward. our open going countries per you in goal least at three new

open of in in years. announcing access than deals together countries, XXXX, as the international including expect in existing announced points X,XXX than access. and points in XX% this of there first recently our access of has we've or nearly France to a XXXX, far development represent for as seven five we morning, of signed Jamaica potential well points more more France XXX X,XXX which So the joint for venture alone

right than as stake years. a operates France minority this XXX with operator cafes future the acquire partner enter in in to -- a will market Columbia strong with very We majority more in which

building existing our are opened the proven in time a franchise franchise achieved the Additionally, sales in pipeline a shop new With the as market a new Middle markets. Jordan with as and East. Americana, in at partners, in certain first both we model, weekly looking strategic equity well strong stakes for partner East, Middle ever and entries for highest recently the very

the quarters to be as become sweet we market entries announce the most world. treat over to brand expect the continue journey coming to We in love further able our

last few omnichannel is strategy Krispy number While access and lack product. one do by years, our customers to over still not has Kreme purchase significantly the of grown away our far reason the

to grocery convenience of journey been has access this points by point DFD led in and stores. Our

we evolving channels. the Spokes strategy to over time However, see more

nine that in bringing so in pilot an common. test area Louisville, announced Kreme and brands operational Krispy two serve to have Kentucky Just doughnuts, recently, much McDonald's surrounding the of we together iconic with locations

DFD this a a the global long-term strong we this access goal our achieving of that with than to global shows type grow of small that globally. significantly in company. partner business. great represents of why But to test more we be points partners a think opportunity Obviously, fit XX,XXX remain our is very could believe We confident

look partners on Hub Spoke and We to and and out this build continue increase customers updating to globe look forward our access for new we to channels as the to model you journey. we across

on challenges pricing, cost remain we points challenges and proud has extremely I'm like and to access continues I manage evolve capital but confident Low external team will with expand how discipline Wrapping the up, pressures. to our geopolitical ways. markets, of to in strong of as model Short-term macro manage highlighted thrive, inflation in levels our pricing excellent by some am organic ability efficient elasticity ability to new of quarter. the third growth omnichannel the the continued and in in and growing

an At our long-term headquarters in will we Carolina, further quarter, which and strategic detail Charlotte, are that be to in also we vision be excited mentioned here I goals. time, Investor on As webcasted. December hosting very will last at XX growth North provide Day our

to updates with you initial We this outlook will XXXX of a exciting and at our share XXXX introduce well. as have number event to

Josh through our for the Josh? XXXX. and now our over balance walk to to turn of it outlook you financials I'll QX

again our channels to beloved across In everyone. our once our morning, growth good across world. the and third model Krispy and Mike, business that quarter, sales brand show deliver Kremers our Thanks, and the combined unique

the with currency acquisitions, XX% stronger and franchisee which even in organic foreign Sales impact growth, $XXX revenue to XX%. excludes grew of and changes million

more added daily from globally, taking we light XX,XXX year XX-month ago. points the fresh sales per over increase hub, with and in brand capital activation another points access and delivered to of XX% of both access, increase in prior our of in a Along fresh X,XXX domestic business to segments. resulted our has quarter, nearly a than year the initiatives, us pricing this form an international the During mostly compared of XXX doors, in successful

for from see a of little the price EBITDA further for of the would We points benefits the million was slightly also to access $XX.X were of efficiency the to additional of higher EBITDA future, ago. to up, a partially year Adjusted million by as theaters. a down foreign have off-premise adding two exchange $X.X in the increases benefits light third hot impact, factors. due a higher It but and been indicator quarter, offset this margins sales strong

was living reflecting the sectors, U.K. all traffic First, market of by our high challenged cost in there. weak retail margin Germany crisis

with U.S. final quarter, due Beat the U.S. our activity no ramped the promotional of Day. activity return the with meant saw the discount, sales. through which prior all the price along remained higher quarter first that well promotional the of Pump the year. price on quarter, received two to way period significantly of impact in for Second, This, final high than pricing months on Labor The the additional posted DFD normal the in in September, margins to period the

was net our was quarter, third the net includes was of Hubs which EPS, the diluted as the part for income in GAAP planned Spokes shop quarter of the Adjusted million U.S. in million In diluted the $X.X and million EPS $XX.X charges strategic our $X third of adjusted $X.XX of quarter loss review related impact to impairment $X.XX. without or closures negative

quarter due In $XXX quarter the delivered million strongest acceleration quarter total again the and X%, total in of points business of from fresh access, increased U.S. third U.S. via revenue doughnut the in strong to in third at an and in Growth Insomnia growth but Cookies. in to to on second added our also growth was organic performance. access XXX was the partly X,XXX increase Canada XX% and X% e-commerce a and the Canada. daily, We we saw shop our points segment, taking

to in we their customers floor in the expect the U.S. growth space of store fourth during minimal with year, points grocery changes holidays. quarter accepting Like the not access do last

their We access strong points growth in again to expect resume though. of XXXX

per Hubs up success compared of Hub two model to Spokes and actions. the a quarter, year omnichannel increased the during basis to a which with ago, a the the U.S., quarter, trailing third XXX is in pricing XX-month our due averaged to million sales XX%, which on in by $X.X

add significant helped in and of Spoke basis working Hub which XXX the Our model and quarter, points is elevated along commodity higher and labor more with pricing, than inflation costs. margin offset

planned third closure quarter, a spokes, opened the review the we I Last the particular, network. theaters, quarter, not cookie of shops in of which with light in Spokes, XXX expansion. Insomnia In addition at of to access shops reaching of announced the hubs increasing performance of are total from Kreme shop do six Krispy approximately our Hubs points number the shops new September. end off-premise hot after without In which XX XXX benefit Cookie

third We closed the quarter. eight shops during

also identified further months. We in close shops, we which coming a XX will the

revenue All be Spokes, Hubs and converted locations without on flat for overwhelming and of could are most represent have potential these EBITDA are closures. not the shops low these to DFD. We believe XX margins which majority of produce negative

production more I our sharing on DFD the we produce by area, converted Hubs, to the also taking closing either details identified forward other Spokes, our be all at way Hubs additional to Day. doughnuts Investor for could this without to we During look December which Spokes review, from lobby in all converted

pricing moving the We in we've from more mid-October the in July Overall, the price reduced low retail brings pricing million both quarter year. and significantly elasticity EBITDA October year-over-year margins a retail which single-digit at of seasonally levels promotional expect the double-digits. our levels increased at and e-commerce, discounts of lower XX% with in in $XX the did remain took after action increase price U.S. September Adjusted third and for to margins to roughly Day. and X.X% price Labor to seen progressed, mid reflecting lowest the and improve low indeed flat activity increases quarter historical as quarter forward. total further increase EBITDA in Canada promotional margin

but International Zealand, In revenue we the increased successful the third a and rate strong much price with during performances our million X.X% with driven saw Net at Now Australia Ireland, product to quarter increases. from consumer headwinds quarter. by creating environment. XX.X% to growth, premium revenue moving with the segment. U.K. innovations temporary grew in the $XX Mexico, excellent FX drag and Organic New the challenging lower and organic continued a

access grow by allowed and even to year points International with leverage international international headwinds. The basis, quarter of our up XXX third XX access by international year XX% from a FX hubs expanded from the hub trailing in million sales ago $XX.X increase XX-month the us ago to XX year-to-date. of points to on in a XX% a per

Australia as Zealand declined was offset EBITDA the New to million, International cost decline recently were as increases cost pricing well in third not XX.X% to decline for $X.X look labor $XX continue the we as markets as in adjusted in quarter in in a from enough to commodities. across U.K. double-digit our gains Mexico, U.K. the pound, million in to and The driven by and retail in and the U.K. weakened a increases took ForEx XXXX. We increase review expected offset price

organic franchise with That in in excess organic a great the growth in market. XX% our increased a third FX up businesses a XX% even very quarter impact our business Total quarter to of our $XX owned and of of both the fund to equity in revenues to second franchise for row. in made particular performances million XX% markets which from the Now with acquisitions. segment, growth third headwinds XX% in saw the Japan, is around world franchise and which development, was and international in quarter the strong market

compared despite third for basis a Adjusted headwinds. to in margins prior impact EBITDA increased the $XX.X XX% to the negative FX quarter, XXX the dollars increased Adjusted development year. XX.X$ points from to market third quarter million in EBITDA million, $X.X

to adjusted the to included We and to EBITDA growth, $XXX $XXX expenditures given XX% our XXXX, adjusted continued guidance. $XXX million. guided guidance, to $X.XX $XX of for dollar to in million $X.XX $XX million. the to capital in closer we in the come million million $XXX revenue EPS with organic in Turning we reiterated This million full-year to XX% million to expect but XXXX headwinds $XX FX which morning, strength

of have expect near range. In revenue and four, momentum our which in top in pricing at expect a consumer to our through lead Halloween performance to to great we record will benefit We from FX DFD, more results in the strong end come line the end the quarter top us at it holiday and the reduce in believe likely the season, EBITDA recent environment guidance. U.K. that discounting of our actions uncertainty us leads but come lower and to with headwinds

locked organic through than of Commodities our XXXX course in confident more long-term our we locked Hub ability in growth strong omnichannel, the and are and of of balance in model well Spoke marketing, near e-commerce. top very remain XX% now have our below through have in the innovation the expansion the line also more needs seen growth deliver and and XXXX, of to high QX both and We at single-digit XX% for the inflation, we bottom XXXX. than for of

of using margins. we're the grow productivity addition, inflationary In and pricing, our initiatives without offset and spokes pressures to hubs optimization

we now please. Operator, call up Q&A the open to can

Instructions] John from Ivankoe Your comes with first line [Operator question the of JPMorgan.

thank like some partnership McDonald’s ask to about talk and can. strategically I'm to Hi, questions you. the about it if I I'd more going

a on to remember, done least First, at Kreme case I to us uncorrectly, given continue. I into there are of doughnut when from don't ago. for McDonald’s this day know not program I few old in study mean, on XX-years London, doughnuts enough that that. stores enough were was just a weren't Ontario what in was I what wasn't was mean, that Krispy remember a put call there what if there's correctly, done sold

XX-years a think on fairly that? certainly So have to versus comments similar versus like some program of of kind just get but me wanted in put today, I changed ago I educate may what

used fairly you of right be I areas distributing think widely may, management XX, stores. really secondly, to for three products you like the distributed that grocery just And if XX a was six, it idea convenience buy currently customers didn't XX, are and that available one where profitable? Kreme brand or versus this to and broader Krispy to was in then didn't or two that like likely Again, strategy I the I mean, stores. doughnuts the in it wasn't that's think brand

which type currently perspective, single wanted Thanks. this stores if could to test From grocery I've much what development very have a DFD seeing is of see occasion, most McDonald’s with different but a than serve you DFD in what be that the I of we're broader obviously seen?

Sure.

So John, this I'll today? give questions, How doing Mike. yes. is just you are you two

First our we've long-term said customer McDonald’s, access about always to as base. to strategy, is our get

believe at In fact, we convenience be that that grocery -- XX,XXX up define and long-term primarily points we of It's very stores. of that going access. to is clearly made point

also evolve with We that spokes. look would to internally other knew

do when them. Louisville, a journey this. we you opportunity So agreed we brand iconic test days, the Kentucky, It's as just early our you It’s we’ll fresh to have about up the And DFD life came, offset to keep on it’s when today. It aligns in model. started an an world-class with McDonald's, doughnuts the move DFD along. we

terms have integrated it -- DFD, to wasn't daily. fresh a I they the an didn't know system of In And model. Canada how a story. It of business do

really they they do pattern. that trying the demand couldn't anytime figure So out were doughnuts, to

gives very history different you a that's lens, history. So but a

packs, can six donut look packs, XX pack, if in you can if our make have other at right, because people single that or and buy three of they partners, you even exists packs, shops, you selections. mix, in where you opportunity, channels about think and singles the walk In terms even other merchandise convenience today will

That's Do in putting cabinet themselves. they the about it locations. want the any? They make

how of a sell. discipline business we in purchase. the single of the really that's We're not donut So

I maximize customers our our a you. do So for fresh customers, and their to system access merchandise are, what questions we're to doughnut they and is mix what using about answered we those in then there. get opportunity. It's today I for building hope DFD where

Florida seeing but and You did, in it's doughnuts. and I in again, seeing the South mean, publics maybe being

my DFD where customers mean, smallest can think store. relatively given how a is you're more presumably many is you the just store I where you convenience go drops to per customer it But have kind going of model terms a per XX getting day? doughnuts sense that grocery where are I where yes. local example, much I model small I is? want stores, mean, it into national sell I how support for that any even serve of at convenience to of back the cases to buy mean, sense, fresh I does into selling accounts day. highly there get makes delivery stores might to predictable, six, not -- might mean, that visitation in in if flex be convenience, pack is daily there single versus flexible

Right.

through about the of the you works. model So on door can a existing additional flexibility store an convenience route, how route an think get adding and into

So that becomes an opportunity for you.

So to continue to will even the from and Tesco well looking ability in and as want to that you as for. customers serves see XX single six the you grocer stores what see evolve

logistics. disciplined maximize but and not by then that at to choice want about it's It's route. actually to through cabinet the there, convenience brands the said a drop, pick and and that build customers, how same you the build route then going we've are having really mix customers, be Different becomes thing before about customers, matter we different so few we're system size, the going looking everywhere going you merchandising option You the there. your

That's for Thanks the patience. evolution. Thanks. interesting an

comes with of Bank Sara of from question Next the line Senatore America.

generally. Could Jessica about the you can with the Hubs existing to all or a would you we need for This if and service in how Sarah just weren’t [indiscernible] rollout example, think stores many DFD doors for Senatore. capacity? U.S. many I broader just how is Thanks about more how McDonald? one question. And another the so additional to, could discuss of more you support you on from Walmart for much McD more your related to talk guess, my partnerships Hi. hub taking or, is This

excess across others. door Hi, $XX million Walmart, that sales mean, it's is to clearly do we track internationally capacity. than the compares in just to DFD a build Yes. guide out that whether Josh. Jessica. $X.X This you know million the U.S. to have give hub the network, We the I of per capacity McDonald’s good U.S., more or

of DFD all door have hubs -- growth out U.S. not and with can the be are all optimum and enough U.S. to there significant more some match room to existing but the hub currently supported largely or added are for going to in be in opportunity five locations by Now growth plans annual support that a forward. structured hubs to in our will laid our year level, and the XX increase the international a than network. to XX% guide is maximize grow the more We that

you is strong. Although in growth indeed, the see, as U.S. the

to of So more the look service ways spokes even of optimize able and and we're to of be points then to we need without DFD level continuously hubs to to access. the convert the growth operations existing improve hubs in demand the given our seeing

Thank you. Great.

Next question Morgan Glass line John with from comes Stanley. of the

morning. Good

go comments to First, promotions, back back next timing is going about diminution as promotional promotions Or much holidays, activity price Are and traditional might to just focusing and of you're still favor about you you on as to but on how aren't promote in this given you going just you year? LTOs? the really activity rethinking promotional Mike, the a in your of the demand. seeing U.S. not just reduced maybe point think

big Yes. Well, biggest Hi, the celebration as know, year. John. quarter QX, well quarter, of our the you

promoting premium obviously, holiday more on So and our necessarily we during year kind to same natural season the at it's wouldn't a which don't the of as on price specialty focused promotion. price need this doughnuts, be that time the are much price of have points

the the of successful there's in really of We that So it gained lot found timing that certainly Beat element spring was the a the as Pump as of through promotion certainly bled not summer. that. an notoriety

the that it's as in fourth mechanism applicable quarter. isn't So clear

celebration to them. that be change, to those major want but sure make able value our we provide also to premium So no to provide consumer, we offerings

recognizing for great Veterans is, So dynamics a one consumer we just Day election. the did for promotion changing the

So lot of these as acts to want when that. we appropriate. yes, joy make we'll demand to holidays the a of do through the continue us quarter Halloween, for bottom is sure the this line still of there's and follow big we on But

just as international about your a just with And the markets? that. sure wasn't to quick the had can make I'm growth follow-up, points if in to in you talk the point the do access of for retailers U.S. that about There much. timing Thanks not quarter, want that's of whether international number reset maybe earlier due Thanks. in to in a the the the particularly international, don't the what's U.K. fourth in as access markets, to in in result, the a exits of the in growth happening points business? DFD

second the may growth internationally. quarter seen in strong back have You very

the we done sort more second or anything In So any didn't the the teams that of timing during like great that. quarter, more see a piece. gains of third a quarter. It's just it's eggs are

that fourth on from as quarter view the your is therefore see And much? so the quarter second still or that don't pull forward you normalize

expect the don't around of of points certainly quarter wanting a a holiday access growth that world we the other a those fourth floor activity. is of lot typical lot not in have grocers Well, when big change for we on

expansion first strong when back is we'd growth. to expect that to quarter The year go next

merchandising but We add, out looking we've not the access, of additional improve is to got to merchandise, but reset are just add January opportunity to great already continuously there. points new the and store that continue a really

you. Thank

question from line Our Wolf Andrew of next comes the with C.L. King.

over Kingdom. I got price, increase this Thanks. a X% right, On on the the a if of had Good questions you about morning, United couple summer. already

a there parts other higher tell increase, up of commodity teens, in I to prices to does think the running that inflation? it assume than double-digit I is your it's us the you so what just world? about mid mentioned high if

secondly, you is far? view as consumer experiencing said, price had big of in any have something so And a a economy, particularly hike, crisis? on the you that's elasticity I mean,

-- I'll with Maybe start first I’ll and the --

have the XX% been year we little We're a fuel also versus slightly seen rest this inflation bit about inflation, costs but higher seeing about the world just wage little as and inflation the the on in elsewhere, of XX% not on the same to inflation drivers. bit a logistics on higher average commodity overall, on U.K., U.K. So little the commodities. has in U.K. bit higher higher the globally, a in

all tough reflecting, that's there. the economic of So course, conditions

want price? about to you do Mike, talk the

Yes.

the general, product. and of think about you seen the by in consumer we've the If as pricing channel right get consumer we into the and

Jaffa exceptionally launched just well. doughnut that we the Nut So did

consumers So part will lets that through also the access. customer the continue move to wants approach to at the business The activity the promotional to that the continue to omnichannel look marketplace. the us where goes of

around from or price they retail, to they access sensitive become shift delivery to around one, have the they channel. shift they So the

is pretty our grow. and we're U.K., that, with even So to business comfortable we'll about the really still able be how continue solid to in

be And better the mentioned lower it. what's end you wanted about you looking for to outperforming -- regions the infer EBITDA the for U.K. going and the in And maintained because that what of the it's Or to kind about But we it internal might despite I on Got might Great. expectations? in ask segments which U.K. be is. were also your you guidance, U.K. other are you should

Yes.

world. do the around the anyway. from countries performance we expect we in had in obviously in a lead fourth actually the particular, great But It's to a U.S., we the way quarter, strong forward, the sorry, quarter the Halloween. although Looking see U.K., many big U.S. in

them to those expect particularly We higher at and the price volumes, flow specialty through. points doughnuts drive with

the are As the we lower U.S. took -- right materially the end we of discussed DFD, quarter at discounts third pricing on and in only the earlier,

we so for on benefit quarter a And that. full

the call, optimization earlier we without mentioned the have the with Hub momentum Hubs continued flow-through in Spokes I and and on Also, on also the Spokes. program

the the seeing that So still U.S. a we'll challenging both things model and FX being deliver how thoughtful that number give But the the guidance. then just and conditions. and the on omnichannel strong, And conscious Spoke manage be momentum clear that through we're bottom working. rest in expectation able confidence with these world, the to of strong to is We U.S. the the headwind economic line. we of in top U.K. Hub be of overall, to our need around happening

that how as the actually of how thing well right? adjust actually approach not access it. It's the top it how that, right? one and these a to model consumer give shows multichannel single can omnichannel even the U.K., retail our line, really a benefit point, on one bit It's you right? mean just every and countries can I little how Yes. we as a one, should all support to growing view us, environments in of you So

the that's Josh the going in growth where by -- of time will So as just And countries be come but revenue organic a lot it's this saw through. to U.K. the U.S., even said, led we

you. Got it. Excuse me, thank

Andrew. Thanks,

Our of next question comes from Brian Deutsche line Mullan with the Bank.

Thank you.

related, sit to development confirm, on that is in a could France access on of think to expansion, I hubs? Just if you how news, of your And evolve that the you just or question out access comment build you you the segment market spokes. in layer could specifically market stake, a going international points the could you how types segment? different on expect point mentioned of minority quickly between your the but the then need in then just And to

that next Just launch any color be steps for would great. on the

Yes.

completely minority we start and do with access of we a out are the strategy. about doughnut segment. We'll what's That after, in leveraging It's that there. about the shops spokes. be building It changed we That's a development see but the the you existing then hubs will capacity. hub, France. all not JV the and It's at pretty start look adding X,XXX Krispy market did points soon that Kreme. in building the -- is opportunity, So

we'll start then open start building our start starting or you'll in France. see network XXXX, potentially we So that and in two our with hubs the spoke hub happening appropriately. in And one France to first

then a And thanks. Okay, just follow-up.

about the on in us guess, are you say, growth five currently of years? business U.S. three and one, to number Just update sustainable Treats over, revenue the you maybe the the I Canada. Sweet wondering if thinking next pace could how

represent the just EBITDA any number dollar tailwind then think or us XXXX. could -- way help in is And margin that segment two, to about

basis, that want confirm a a next Just you'd and would full-year to year on tailwind. expect profitability be

That long-term was Sweet the and continues all the branded network a and potential pleased So, of partly in in as to category Sweet the in shelf mature branded year. longer manufacturing result delivered the taken earlier up which Treat confident gains of there well. We quarter, the profitability of in Treats. our pricing And Sweet to start life continuously actually remain we're seeing optimizing we're another Treats business third quarter see.

to I quarters. You in frank, bottom distribution. the but Treats, in performance the Sweet and happy line broaden Fresh asked with phase. the of potential still about be But to business, we Delivered continue start-up Hub contributor model will coming We're branded that the think long-term of be biggest Daily the it's Spoke XXXX, our its

of comes next Truist question Chappell from Bill Your with the line Securities.

morning. Thanks. Good

better the overall and in if don't I but way. I'm wrong discussed the Like this XX% are you've price would down it's the certainly that's kind of if understanding -- look -- per increase access, know anything at we've that than and pricing know I if the a this points want up at more X% imply up Just actually I volumes before, I'm XX%, of hub of know but now. looking you year-over-year. numbers then taken it global benefited, sales

look some overcome? XX% expect that to to even into So talking are reacceleration you pricing XX%, And we year, continue have understand, next to as I you do just Or hurdle is mean, comps? a I'm trying pricing? you X%, despite

before. and I that we selling Globally maybe there, gets stick back. fourth The we're in to the in It's of way. than metrics some doughnuts us now mentioned in the But that up that low Volume more if of quite moment can't ever quarter. just of them U.S. add double-digit, we've U.S., taken a beginning the is to a lot step for increasing. pricing the you with

helping to point. drive certainly your our momentum strong line top that's so And

you points of the biggest terms and pricing actions pricing, the modest with contributor, combined elasticity, That, taken. take relatively we've impact of access, the but pleased a low, whenever we're with there certainly, in is always,

actually. still volume mix effect towards We the of the volume One Fresh a That way numbers And growth a sell more high. added of the skews reasons is way, bit. bit Daily. little it dozens the you a of the is the Delivered

we a of and in U.S. in when those expansion channels expect and Volume, And Hubs look continue the you Spokes to part to forward, doughnuts and big the the points across of deeper from leveraging it drive access volume the coming of our pricing.

combine So why in to the long explain momentum expect is in we're seeing all things we run. what quarter fourth those the the

you -- you or the just what's of in to hope reacting trying impact volumes. having to you Are the I'm can I And -- points, you I'm then that elasticity to take it's the U.K.? you trying can -- of understand elasticity And Okay. maybe what follow-up. further so to need the U.K. do to pricing in the pricing at haven't lower at consumers been looking the price take pricing are that understand able even specifically maybe and take the or and

pricing to pain and Just it's that your just outlook. Thanks. trying pretty that's kind impacting volumes I'm to economic how understand trying understand for how specific area. of

that's the not So going marketplace. in on elasticity challenge it's an

those So which think business right? it and a and being part I What about becomes from a able that in how much is channels our interaction channel those channels when were Just because partner to launched barrier that we customer, more continue to consumers business. very you how And it, with channels world the Tescos just about us got is has getting from it in with do business just pricing see is is successful, the And in thoughtful our premiumization right? consumer in of continue omnichannel is front to could how also to and are promotion, opportunity new reacting in doughnut -- is U.K. you look the us. we U.K. to of interacting supermarket very to continue of shifted at opportunity if can it partners the so other for the in a the -- grow, significant the that trade still them. general, is the

We continue to that. believe

for the Thanks it. Got color.

Sure.

Evercore Next from with the comes ISI. question of David line Palmer

do pricing net about to hedging morning. U.K., net your pricing I'm curious commodity example? does of inflation, commodities. you any When catch how that between of differ Thanks. to for doing? And U.S. the Good expect and -- you're up

U.S. price saw early later retail third the on during you quarter, first the So and the us for in time the the in take quarter, XXXX in DFD in quarter

quarter pricing the We in U.K. the in earlier also took

that the certainly but at we beginning price was We Following increase, in anticipate saw. catch-up. small, the quite with year the U.S. of we're And U.K., beginning of of didn't would the the year. definitely had I those that, the say another taken at pleased as the of beginning food U.K. the the of a level inflation we initiatives. pricing or success the

so can instantaneously pricing further in But that on We've U.K. U.S. on and need We pricing increases, the environment do with in the this of obviously, behind. to partners increase bit our we then DFD, we in taken October work both retail. almost price does that, a find little lag

the you're we're the to say catch-up working would I to so level describing. fourth through now And quarter

we're that it's very to fair that close now. So to say

favorability of of environment but high but little that to high. We some on with ingredients commodities. some be requirements in remaining it's already do Krispy Inflation a continues in our slowing read more of gone We wage we and, than the than the XX% want out have have leads like year, little it to more in years context those which we a inflation we've see obviously, commodity us our further indeed, is next good in single-digits. covered, a invest past on It Kremers, bit.

your the bit third, the into which January original think we a DFD, as of stays now behind, we in little mentioned said, we're in sure as that terms like the we're there, all a here close. of pricing qualities maybe question obviously quarter, having in kind with little the behind the earlier, up we to make about So but stand as still I fourth

in of what at ‘XX as be wonder, growth to in algo But -- I looking about point? there's maybe from rationalization. it. non-hub are about to you of you us versus are are of to long-term terms if that. impact this we're some pricing for general. some us at for know above you U.S. be But those thinking talked trajectory EBITDA you advise I net about going of would thinking talking You Thank things comfortable be that you. be the Thank about? some the than what would going big what buckets Great. expect in But are And be commodities, you're ’XX, to your this other U.K. or don't clearly, at? the have whether

share that as time, maintain I'll the about in the in our U.K., growth of momentum. But same of line access. U.S. momentum working strong do points than growth XX% at -- seeing world, said, we in do the quarter. can -- XXXX. what It's top third elsewhere, increase and more course, a volume Well, what economic Mike climate. plus, And the very organic the Across in and year the we're this clear to on pricing we now even it's willing share to delivered we

that we come, by all a in years supported see hub modest So trend growth is fact. to that many for continued

Spokes, margin the those Spokes. less that environment and mentioned, portion seeing both earlier to from exit mentioned further been the look to you and so We're Hubs to indeed fixed a with access And leverage I as successful. shown more expect and costs, we of in benefiting model without cities XX, of of the this now we're continue. additional clearly be to to note existing benefit The some of characteristics Spoke. change bottom as that our operating the thing Hubs big Hubs line them to on looking we flow-through from points add next and the and these hubs the more Now largely is

we can at. of drive So a things number

the is confident we as thing we we're those were FX this on trends. in I the as of it when that best that broader manage this Krispy But and what's just mean as We'll course, Kreme our control started can. some of in of is great environment we in model, isn't within journey. entirely consumer the sentiment other that, -- U.K. is model one, the the

we've in similar very to long-term And the so plans to what can't give Investor Day are December. wait just We been detail our talking you at more before. about

made to that the access deep of how do we in I some the out Spoke about more dive high-level on some of see expansion, comments and U.S., earlier these that years, in talk a want of really new the there. optimization of We markets. future on particularly A question playing France points share Hub those

a I rich of think there. insight there's lot

very we digital well share in with growth then thanks the particularly all about Insomnia largely in we strong just this very look adding success continuous to you can't performing e-commerce today, but cookie And cookie the shops. and the of shops about wait business, we side to Cookies. We're side other ahead. have one that further we seeing today, on not that more at that the call haven't one talked We're that's on is e-commerce as

Thank you.

Goldman Sachs. comes with from Jared Garber line question of the Next

the Good rate margins in for you morning. question. seeing get or the the the of quarter fourth a taking from sense so sort exit far quarter. on Thank wanted to third of what the you're I

about on positive margin the a talked incremental bit You line. trends little the

imply pretty in step-up quarter? would in fourth margins commentary full-year think the I the meaningful EBITDA EBITDA a top line for the and the the around

incremental price terms one just follow-up. like I maybe of you're a mean, incremental wanted what that in wanted margins sense So I you to-date? the I to just have And of as to number through then XX%. to looks get get I it's of close flow maybe, seeing a sense the

the clear, price in period the is It's are working the and see pricing doughnuts, which the guidance that working. period the is VAC at that are these that strong and premium at U.S. in nine can the XX The reiterating of doing volumes in terms and calculation you in the specialty are particularly math reduced discounting Yes. same a point.

the guidance So all Hub in the Spoke things we're and model to we've the given from in what largely U.S. doing deliver combined that those through confidence

reporting FX flow-through. U.K., growth good segment we're still bottom Australia, good well a line. just development highlights, and well, top with Mike business. and Internationally, is although In the performance Mexico doing it's we're performance headwinds. the seeing as and even market It's in uncertainty a the The as also seeing

every on reiterated we the made. line, that reflecting there's assumption expectation kind you've bottom morning So for that the this the deliver guidance we'll of that

Great. rate? EBITDA we that be margins it guess you on U.S. would correct. at to year's last year And up above was that, last following think just I I if Canada and expect have XX.X,

basis should maybe pretty I be versus quarter bit XX a points, year, that? little close, about just thinking this -- think but maybe so how curious pretty last we came down down

holiday mentioned, that in a summer margin is our we the I and fourth all the quarter Well, do this excitement our indeed, think Krispy And third big to for lot those the -- months Kreme in generally quarter quarter, U.S. reflecting quarter, of the -- discounting. quarter lowest third the ahead yes, reflecting the consumer. reflected as with

So markets. the the But the fourth we leading individual the don't guidance on it's on quarter. bottom way for clear give their be will that in based U.S. current performance the line

the And guide then this this reiterated if end the Josh, It don't of like, just you I morning, believe I the you of year you're X.X. which one mind. quarter, looks is as Leverage, end of target above Great. by the running X. more, know leverage

you how sense to of year wanted X.X? and to about a how level get get end we I So should that that think just to leverage the

is I This take that. Joey can Yes, Pruitt.

-- Just

Joey. Hi,

first EBITDA there. of strong will performance, we things to talking I as standpoint, reach doing certainly a couple guidance there, you Yes. helpful a all, range about our How for are from expect which already us of an that QX Jared? look be you've been certainly Just

well we Working quarter have a than standpoint. sale do higher like through things little things it cash like to that, in year the We drive just in debt that the the couple leaseback favorable fourth addition as also some a of to from going a to down another EBITDA as that will be rate. we can do of some can that the is QX, our things rest to more was us help capital run

main the things are there. those So

couple the benefits Spoke and made of we we improvement, U.S., I look actually at longer particularly When of an also just in Hub model, an back, that a acquisition from the -- EBITDA the we margin-accretive expect so through Yes. that for of this months in accretive starting to the -- business. come EBITDA we the EBITDA coming. that under calculation now, just of you just made. million, $XX Midwest, None It's that paid that into back none of -- doesn't leverage go it is

then quarters. improvement, the So focus working capital EBITDA coming for continuous the coming through of will that benefits the general and acquisition on be

position. why People our Bear ask in a debt I mean all interest to We we're about we can mind, gate rates. it's leverage, do make sure position. want net to in with strong

middle in back our recent debt fortunate rates position. than the to XX% of We the increases rates, from decided fixed XXXX. to interest a through our at are years is We all of and the of couple more fix a way before

payments significantly interest position, our give increase at obviously middle our us the least look we the to doesn't it of and given the So that won't to leverage, leverage drive the down fact reduce increase EBITDA up managing through cash but concern to ‘XX.

Thank Great. you.

like At Mike are no closing the remarks. this would over turn there call to I questions. for further time, to back Tattersfield

incredible evolve look every as Thank the Kremers, that much. the everybody and to the in for job third on Kreme. how see the as doing to us we the a for we would webcast And Investor the quarter, who and detail I well or forward on in Krispy end how to had well. as continue growth seeing the thank want all very that view the and to lot story day. listening appreciate everybody attend off call an And how growth I like of to more you'll to Krispy Day the we are you just year,

This conference. concludes today's

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