Krispy Kreme, Inc. recently disclosed its financial outcomes for the second quarter, revealing an adjusted earnings per share deficit of $0.15, a figure notably below the anticipated three-cent loss projected by market analysts. Concurrently, the company experienced a sharp decline in adjusted EBITDA, plummeting by 63% to $20.1 million, while profit margins significantly tightened to 5.3%. These financial contractions are largely a direct consequence of the cessation of its collaboration with McDonald's USA. Despite these challenges, the doughnut giant managed to surpass revenue forecasts, recording sales of $379.77 million, slightly above the analyst consensus of $378.09 million.
The downturn in sales was predominantly driven by a $64.2 million reduction stemming from the divestment of a controlling interest in Insomnia Cookies Holdings during the third quarter of the previous fiscal year, with the remaining stake also sold off in the recent second quarter. Regionally, the U.S. market observed a 20.5% dip in net revenue. In contrast, international operations demonstrated resilience, with organic revenue growing by 5.9%, fueled by strong performances in markets such as Canada, Japan, and Mexico. The conclusion of the McDonald's partnership, effective July 2, 2025, necessitated a strategic re-evaluation of operating costs and transactional volumes, which had negatively impacted the company's operating leverage.
In response to these financial pressures and the changing operational landscape, Krispy Kreme has articulated an ambitious four-pillar recovery strategy. The first pillar involves an accelerated refranchising of international markets and a restructuring of its Western U.S. joint venture. This move aims to bolster financial agility and unlock new avenues for growth. By transitioning to a more capital-light model, the company seeks to enhance its return on invested capital, emphasizing the efficient use of existing assets and strengthening ties with its franchisees. This strategic pivot reflects a concerted effort to minimize direct capital expenditures while expanding the brand's global footprint through a network of robust partnerships.
The second and third tenets of Krispy Kreme's forward-looking plan concentrate on operational excellence and efficiency. The company intends to significantly improve its profit margins through various operational optimizations, including the outsourcing of its U.S. logistics. This streamlining is designed to reduce overheads and enhance supply chain efficiency, thereby directly contributing to improved profitability. The fourth and final pillar centers on a more refined approach to market expansion within the U.S. By exclusively targeting revenue streams that are both sustainable and accretive to profit, Krispy Kreme aims to foster healthier and more consistent growth. This selective approach will ensure that future expansions contribute positively to the company's financial health, rather than simply increasing top-line revenue without commensurate bottom-line benefits.
Looking ahead, Krispy Kreme's leadership anticipates a significant turnaround in the third quarter. The company expects to fully mitigate the costs associated with the terminated McDonald's partnership and plans to ramp up its fresh-delivery operations through collaborations with high-volume, profitable outlets and major retail partners. These proactive measures are poised to restore Krispy Kreme's financial performance and set the stage for sustained growth and enhanced shareholder value. This strategic redirection underscores the company's adaptability and commitment to navigating a competitive market landscape by leveraging its core strengths and optimizing its operational framework.