Krispy Kreme Financial Analysis Case Study

Introduction

Krispy Kreme Doughnuts, Inc. is one of the world's leading retailers and wholesalers of doughnuts and packaged sweets. The business is the owner of and franchises Krispy Kreme doughnut stores which will make and retail types of doughnuts and a wide range of coffees and other beverages. It runs about 530 stores both locally and in foreign countries like Australia, Canada, Indonesia, and Mexico among other countries. The business is brain quartered in Winston-Salem in North Carolina, the US Krispy Kreme Doughnuts, Inc.

In this newspaper financial analysis is done between Krispy Kreme and average industry which is comprised of other companies in the restaurant industry for example the Starbucks and McDonalds.

Financial Ratio Analysis

Some of the key ratios analyzed in this case study includes the following: Come back on Equity (ROE), Go back on Possessions (ROA), Go back on Purchases (ROI), profitability, margins and earnings, liquidity and leverage, budget and efficiency ratios.

Quick proportion: This is actually the measuring of liquidity percentage which is performed by contrasting current possessions minus inventories divided by current liabilities. Krispy Kreme's quick percentage is 1. 73, while the industry's is 0. 69. This is an extremely positive percentage for the organization because it indicates that the organization has a competitive edge in the industry as it pertains to its ability to repay its personal debt. i. e. its potential is superior as compared to that of the industry.

Inventory turnover proportion: this is cost of the goods sold divided by inventory. The businesses turn over proportion is 20. 03. This means that the company is able to sell their inventory in 18 times on average as compared to the industry's turn over which is 31. 78 hence can sell their inventory in 11 days. From the fact that Krispy Kreme is an extremely liquid company, as far as rate of inventory can be involved, there are a little in it.

Return on Assets (ROA): this is actually the key signal in evaluating the way the management is producing profits from procedures. ROA is net income divided by total belongings. The Krispy Kreme ROA is 12. 28, while that of the industry is 9. 15 which sizeable difference in the ratios means that the company has a huge advantage in that for every money in total possessions, Krispy produces $12. 12 in net gain as the industry produces $9. 15; therefore it means that Krispy Kreme is good in using its assets to produce more income and therefore high profit percentage.

Price-to -sales multiple of the Krispy Kreme's is significantly higher (4. 64) as compared to that of the industry (1. 63) which means that it is rather positive for medium to large measured firm.

The price-earnings multiple of the Krispy Kreme's is 16. 18 while that of the industry is 21. 73. this from buyers perspective point out that Krispy Kreme is extremely overpriced when compared with its opponents and profits will continue to increase hence the company is more likely to increase their stock which really is a generally a good sign for the company.

SWOT examination of Krispy Kreme

Strengths

Krispy Kreme's has the capability to align its strategy and execution of its brand potential. They have their priorities established on having both brand value and internal cultural values. Utilizing their brand as a program, it has developed strategies such as promoting, understanding and guarding their brand, penetrating complementary, offering off-premises channels of offers, and linking everything they certainly.

Also, Krispy Kreme are extremely committed to corporation building through adaptation of common principles of integrity, learning, sharing, authenticity and having positive expectations. Adopting commitment principles affects both internal and external human relationships which then will serve as a level for all insurance policies and programs.

Krispy Kreme has limited obstacles in creating a successful strategy in standard market cycle and therefore they can easily satisfy its customers needs which works with their advantage when it comes to competitive edge.

Also their Doughnut theater experience coupled with clever marketing creates a myth for consumers. Krispy Kreme relies on person to person before which they flood the marketplace with memorabilia including T-shirts and hats forming an unpaid commitment base.

Their best marketing concentration is their charitable work through inexpensive charges to charities and giveaways and using this method they emphasize on the value on commitment to the community.

Upgrading their extranet to a far more standardized, browser user interface where administrators can signal specific resources required by users because of their framework while safeguarding important information from their competitors has proven to be a competitive edge for the business. Here, information can be delivered to customers and employees anytime anywhere. Also, it allows the company to use more successfully and stay ahead of competition while avoiding high concealed costs of technology possession. As well as the use of internet, customers can be emailed regular newsletters about the company and this takes away the extreme costs of printing and syndication.

Weaknesses

A looming problem for Krispy Kreme organization is the low inventory turnover percentage which presently averages around eighteen days when compared with the industry average of nine days. If not taken care of quickly the firms supply lines will continue steadily to cost more money and reduce future gains.

The financial condition of Krispy Kreme is superior to that of its competition but does have some areas that require improvement. Krispy Kreme's young management is displaying that they would like to be cautious and also have employed an almost zero tolerance plan regarding arrears.

Opportunities

Diversification strategy is highly recommended. Given the actual fact that its customers enjoy their sweetness of these doughnuts suggest that they also benefit from the prevailing environment. Perhaps by allowing customers to see the actually procedure for baking and glazing the doughnuts will complement way to attracting more customers while keeping them devoted.

Since doughnuts are generally morning use, other freshness for the rest of the day should be explored for instance diversifying into fresh baked breads for evenings or deli-type sandwiches each day.

Despite the actual fact that Krispy Kreme strategy of improved extranet services is effective for the business now, there is an opportunity to consider alternatives in altering or expanding the same to suit the continuous expansion of the business as they enter new markets.

Threats

Other trends including the recurrence of health food manias and other consumer inclination issues are also risks to Krispy Kreme's potential especially in conditions of customer amounts.

Krispy Kreme needs to continuously reinvent their ways of stay in advance in conditions of competition as other company's in the same industry are posing serious competition in regard to doughnut tastes e. g. LaMar's Doughnuts is the biggest prospective danger to Krispy Kreme since they go to its customers by working neighborhood pubs and in high traffic areas.

One of the most troubling financial indications for Krispy Kreme are their market value ratios (p/cf, p/b etc) which indicates that in the current market they are valued higher than their counterparts

Conclusion

Considering the financial research of Krispy Kreme, the organization is carrying out well in the industry but still has a great potential of even doing better. Examination demonstrates the firm continues to be new on the market and has had the opportunity to identify itself and its own products from its challengers. This therefore signifies that Krispy Kreme has glowing future.

Also We Can Offer!

Other services that we offer

If you don’t see the necessary subject, paper type, or topic in our list of available services and examples, don’t worry! We have a number of other academic disciplines to suit the needs of anyone who visits this website looking for help.

How to ...

We made your life easier with putting together a big number of articles and guidelines on how to plan and write different types of assignments (Essay, Research Paper, Dissertation etc)