Tag Archives: DNUT

UPDATED CORPORATE DESCRIPTIONS: KRISPY KREME (DNUT), NOODLE’S (NDLS), BRINKER INT’L (EAT), BT BRANDS (BTBD) – with relevant transcripts

UPDATED CORPORATE DESCRIPTIONS:  KRISPHY KREME (DNUT), NOODLE’S (NDLS), BRINKER INT’L (EAT), BT BRANDS (BTBD)  – with relevant transcripts

KRISPY KREME

https://www.liptonfinancialservices.com/2022/06/krispy-kreme-dnut-in-process/

NOODLE’S

https://www.liptonfinancialservices.com/2022/05/noodles-ndls-q4-results-were-promising-updated-writeup/

BRINKER INTERNATIONAL

https://www.liptonfinancialservices.com/2022/05/brinker-international/

BT BRANDS

https://www.liptonfinancialservices.com/2022/01/bt-brands-inc-btbd/

UPDATED CORPORATE DESCRIPTIONS – KRISPY KREME (DNUT), ARK RESTAURANTS (ARKR), BURGERFI (BFI), ARCO DORADOS (ARCO) and RED ROBIN (RRGB) with transcripts

UPDATED CORPORATE DESCRIPTIONS – KRISPY KREME (DNUT), ARK RESTAURANTS (ARKR), BURGERFI (BFI), ARCO DORADOS (ARCO) and RED ROBIN (RRGB) with transcripts

KRISPY KREME (DNUT)

https://www.liptonfinancialservices.com/2022/03/krispy-kreme-dnut-in-process/

ARK RESTAURANTS (ARKR)

https://www.liptonfinancialservices.com/2022/01/ark-restaurants-arkr-new-writeup-performing-solidly/

BURGERFI (BFI)

https://www.liptonfinancialservices.com/2022/01/burgerfi-interational-in-process/

ARCO DORADOS (ARCO)

https://www.liptonfinancialservices.com/2022/03/arcos-dorados-arco-in-process/

RED ROBIN GOURMET BURGERS (RRGB)

https://www.liptonfinancialservices.com/2022/01/red-robin-gourmet-burgers-inc-rrgb-corporate-description/

 

UPDATED CORPORATE DESCRIPTIONS FOR: BLOOMIN’ BRANDS, KRISPY KREME, TEXAS ROADHOUSE, CRACKER BARREL, ARK RESTAURANTS AND NOODLES

UPDATED CORPORATE DESCRIPTIONS FOR: BLOOMIN’ BRANDS, KRISPY KREME, TEXAS ROADHOUSE, CRACKER BARREL, ARK RESTAURANTS AND NOODLES – with conference call transcripts

BLOOMIN’ BRANDS (BLMN)

https://www.liptonfinancialservices.com/2021/11/bloomin-brands-updated-write-up/

KRISPY KREME (DNUT)

https://www.liptonfinancialservices.com/2022/01/krispy-kreme-dnut-in-process/

TEXAS ROADHOUSE (TXRH)

https://www.liptonfinancialservices.com/2021/11/texas-roadhouse-updated-write-up/

CRACKER BARREL (CBRL)

https://www.liptonfinancialservices.com/2021/11/cracker-barrell-cbrl-write-up/

ARK RESTAURANTS (ARKR)

https://www.liptonfinancialservices.com/2022/01/ark-restaurants-arkr-new-writeup-performing-solidly/

NOODLES (NDLS)

https://www.liptonfinancialservices.com/2022/01/noodles-ndls-q4-results-were-promising-updated-writeup/

THE WEEK THAT WAS – KRISPY KREME AND FIRST WATCH PICK UP SPONSORSHIP AT ICR CONFERENCE

THE WEEK THAT WAS – KRISPY KREME AND FIRST WATCH PICK UP SPONSORSHIP AT ICR CONFERENCE

Brett Levy Upgrades Texas Roadhouse to Buy, Brian Bittner Uprades Chipotle to Outperform. Christopher Carril joins Bittner in downgrading  Starbucks.  Sara Senatore Initiated Krispy Kreme with a Buy. Brian Vaccaro Initiated  First Watch with an Outperform.

None of the companies above had earnings reports lately but we have provided below a link for First Watch’s update this week and Krispy Kreme’s slide presentation

FIrst Watch

https://investors.firstwatch.com/news-releases/news-release-details/first-watch-restaurant-group-inc-announces-preliminary

Krispy Kreme

https://investors.krispykreme.com/static-files/433bf0b5-c725-44ae-a03d-c64e7bab1a31

EARNINGS REPORTS TO COME

A quiet time. No reports scheduled until the last week of January. We will keep you posted.

REFLECTION ON ’21, WEBSITE IMPROVEMENTS SET THE STAGE FOR ’22

REFLECTION ON ’21, WEBSITE IMPROVEMENTS SET THE STAGE FOR ’22, CAN’T WAIT FOR TOMORROW BECAUSE WE GET BETTER LOOKING EVER DAY!

Happy New Year!

Our objective is to provide some food for thought (no pun intended). We try to write about topics and provide editorial commentary that you won’t find elsewhere. Looking back over our more than 100 topical articles in the last twelve months, we enjoyed studying and discussing quite a few of the most newsworthy developments. Use the SEARCH function on our Home Page if you would like to review our (unfiltered) commentary regarding:

THEMES such as :

SPACs, the appeal (as suggested by the “players”), and the dangers (hardly ever discussed) of this type of financing.

The economics of third party delivery.

Individual analytical reports on the newest public restaurant companies, namely BurgerFi, Krispy Kreme, Dutch Bros., Sweetgreen, Portillo’s First Watch and Fogo de Chao (pending).

Tilman Fertitta’s attempt to come public through the FAST Acquisition (FST) SPAC

Bitcoin

Inflation, past, current and future.

STOCK PICKING

We don’t get paid for this, except in our own account, but our readers seem to value our opinion so we sometimes provide it. We hope to help our readers avoid predictable mistakes. We continue to be negatively inclined toward the SPAC space and BItcoin. Among the newly public restaurant companies, we might have helped you sidestep BurgerFi (BFI) as well as the Krispy Kreme (DNUT) and First Watch (FWRG) IPOs. Sweetgreen (SG) and Portillo’s (PTLO) were (and are) too rich for our blood, though we are admirers of Dutch Bros (BROS), closer to the IPO price than here in the 50s. As an update, and in full disclosure, we personally took a small position recently in Krispy Kreme, far more interesting in the mid-teens (with JAB buying it back) than it was at the $17 IPO (reduced from the originally contemplated $21-23).

Fundamentals, in a world of FOMO (Fear of Missing Out) and TINA (There is no Alternative), still matter. In terms of documenting that the equity market has not altogether given up on common sense,  we look back at our published analysis of the restaurant stock universe on 11/11/20, after the pandemic psychology had killed the stocks. We’ve provided the link just below to that report, where we pinpointed Papa John’s as an especially undervalued stock, considering the stock and the fundamentals at the bottom of the pandemic. Papa John’s (PZZA) was $77/share on 11/12/19 and today it is at $133 (up 73%). Every situation did not play out as expected, but we also pinpointed Wingstop (WING) at $129 and today it is at $172 (up 33%). The two stocks we suggested as most overvalued at that point (BJ’s and Shake Shack) have gone down, 15% and 10%, respectively, during the same time frame. “Paired trades” are difficult, especially over the short term, so it is gratifying that all four favorite positions (long and short) were profitable.

https://www.liptonfinancialservices.com/2020/11/restaurant-company-stock-higher-than-pre-pandemic-is-it-worth-it/

THE SITUATION TODAY

We are looking at a far different calendar ’22 than we anticipated a year ago, even six months ago. We expected ’21 to be the transition year, with a return to normalcy in calendar ’22, but now “not quite”. The staffing challenge in restaurants is worse than ever, even with a higher wage scale, and the timing of relief continues to be uncertain. Normal volatility in cost of goods has been exacerbated with supply chain distortions, with some products (just as with labor) sometimes unavailable at any cost. However, while a great deal of uncertainty still exists, there is far more clarity than 12-21 months ago. The country is more open for business, vaccines and treatments are now available and generally effective in avoiding the worst possible health consequences. Restaurant operators have learned to manage labor more efficiently, have simplified menus, and have enhanced their off-premise revenue base (with to-go, delivery, curbside pickup and/or ghost brands). While operational challenges accompany the new potential, because labor must be allocated among these new business segments and managed to avoid hampering the dine-in activities, in the best of circumstances operational margins could exceed pre-pandemic levels.

The stocks

Publicly held equities have cooled off from the inflated values of early 2021, a number of well established companies trading in the lower half of their historical valuation ranges. Among the restaurant IPOs of 2021, Krispy Kreme (DNUT)($18.58), after declining from the $17 IPO price to under $13, has recovered,  not in small part due to parent, JAB, buying back millions of shares of stock. Sweetgreen (SG)($31.48) is just above its $28 IPO price, after peaking the first day above $50. First Watch (FWRG)($17.43) came public at $18, traded just briefly to about $22, then bottomed below $16. Portillo’s (PTLO)($40.27) spiked to over $50, collapsed to the low 30s before recovering to the current level. Dutch Bros (BROS)($53.24) ran from its IPO price of $23 to about $75, fell back into the 40s before stabilizing here. The cooling process is also in evidence by the fact that there is no restaurant related SPAC that is trading at a material premium to its IPO price. Especially symbolic is the lack of premium for Danny Meyer’s USHG Acquisition Corp. (HUGS)($10.36), which has announced they will become a “cornerstone partner” with JAB controlled Panera. The uncertainty here is apparently the not yet disclosed relationship between HUGS’ capital and Panera’s valuation but the “smart money” is obviously not willing to bet that HUGS common stock will be compelling after the fact.

Our analysis going forward

For our investment purposes and yours we have updated our website. The “Corporate Descriptions” section now provides, at a glance, for every publicly held restaurant company, the most important parameters relative to current valuation.  For example:

https://www.liptonfinancialservices.com/2021/11/mcdonalds/

From that starting point, our investment process consists of evaluating the current operating fundamentals, whether or not the “on the ground” developments will materially change the financial picture. As part of that summary, we provide a link to the most recent conference call transcript. We are in essence looking for operational inflection points that are not yet reflected in the stock market valuation.

These Corporate Descriptions will be kept current on a quarterly basis.

Further “bookkeeping” improvements

This website will also keep all of us posted, on a weekly basis, which companies are about to report earnings. In conjunction with this weekly update, we will also publish changes in analyst ratings, and a link to the most recent  publicly disclosed “data point”,  the relevant conference call transcript.

In Summary

We thank all of you for your past support and are looking forward to sharing with you a great 2022!

Roger Lipton

UPDATED CORPORATE DESCRIPTIONS – THE ONE GROUP HOSPITALITY (STKS), FIESTA RESTAURANT (FRGI), BURGERFI (BFI), KRISPY KREME (DNUT), PORTILLO’S (PTLO), DUTCH BROS (BROS).

UPDATED CORPORATE DESCRIPTIONS – THE ONE GROUP HOSPITALITY (STKS), FIESTA RESTAURANT GROUP (FRG), BURGERFI (BFI), KRISPY KREME (DNUT), PORTILLO’S (PTLO), DUTCH BROS (BROS)

UPDATED CORPORATE DESCRIPTIONS – SHORTLY WILL INCLUDE VIRTUALLY EVERY PUBLICLY HELD RESTAURANT COMPANY – to be updated each quarter

The summaries we show, while not complete in detail and involve a number of approximations, provide a good starting point for our own investment banking activities and will hopefully do the same for our readers.

https://www.liptonfinancialservices.com/2021/11/the-one-group-hospitality-stks-in-process/

https://www.liptonfinancialservices.com/2021/11/fiesta-restaurant-group/

https://www.liptonfinancialservices.com/2021/11/burgerfi-interational-in-process/

https://www.liptonfinancialservices.com/2021/11/krispy-kreme-dnut-in-process/

https://www.liptonfinancialservices.com/2021/11/portillos-ptlo-in-process/

https://www.liptonfinancialservices.com/2021/11/dutch-bros-bros-in-process/

 

RESTAURANT STOCKS – Recent Change in Analyst Ratings – SHAK, DNUT & QSR Downgraded, TACO & PZZA Initiated with BUY, LOCO and DPZ Initiated at HOLD

RESTAURANT STOCKS – Recent Change in Analyst Ratings – SHAK, DNUT & QSR Downgraded, TACO & PZZA Initiated with BUY, LOCO and DPZ Initiated at HOLD

Jim Sanderson downgrades SHAK to Neutral, Bill Chappell downgrades DNUT to Hold, Eric Gonzales downgrades QSR to Sector Weight, Todd Brooks Initiates TACO and PZZA at Buy, initiates LOCO and DPZ at Hold

This summary is planned to be a regular feature of Roger’s Review, along with a “heads up” prior to  next week’s reports. We welcome commentary from readers as to how these features can be more helpful.

Roger Lipton

KRISPY KREME IS BACK – FAR FROM A BARGAIN!

KRISPY KREME IS BACK – FAR FROM A BARGAIN!

The preliminary filing indicated a raise of $100M, but that amount was understood to be a “place holder”.  A final prospectus, with filing price and number of shares to be sold was disclosed this morning. At the midpoint of the filing range ($22.50) the company will sell a minimum of 26,666,667 shares for net proceeds of about $565M. The ultimate raise could be 15% higher if the “green shoe” option is exercised by the underwriters. There will be 160,890,354 shares at minimum, 164,890,354 at a maximum. This would value the Krispy Kreme equity at a minimum of $3.6B. The use of proceeds is described below.

VERY BRIEF COMPANY BACKGROUND

Founded in 1937, Krispy Kreme came public in 2000 and was a hot stock for several years. However, very rapid expansion undermined the novelty effect, the Atkins diet craze may have hurt sales, the brand image was undermined by distribution points such as C-stores, and franchisees were further disillusioned by the profit the franchisor made on the distribution of product mix and donut making equipment. (Shades of TCBY!) A stabilization and building effort began in 2005, resulting in JAB Holding taking the Company private in 2016, for $1.35B.  In the preliminary prospectus filed on June 1st, there was $1.2B of debt, $350M of which was owed to JAB. Prior to the IPO, since June 1st, a new $500M term facility repaid JAB.

USE OF PROCEEDS

As presented in the prospectus filed today: “We intend to use the net proceeds that we receive from this offering, together with cash on hand, if required, to repay certain of our outstanding indebtedness under the Term Loan Facility (referred to just above), to repurchase shares of common stock from certain of our executive officers at the price to be paid by the underwriters, and to make payments in respect of tax withholdings relating to certain restricted stock units that will vest or for which vesting will be accelerated in connection with this offering, with the remainder, if any, to be used for general corporate purposes.”

It is noteworthy that the Use of Proceeds did not include repaying JAB, but a Term Loan took out JAB, then was repaid out of Proceeds. Looks a little better, we guess.

It is also worth noting that both JAB and Olivier Goudet (Chairman of the Board and CEO) have “indicated an interest”, which “is not a binding agreement”, in purchasing shares of the IPO: $50-$100M in the case of JAB and $5M for  Goudet.

THE OPERATING NUMBERS

From 2016 to 2020, Net Revenue increased from $557M to $1.122B (a CAGR of 19.1%), but a large portion of that revenue growth was generated from the buyback (for $465M) of franchised stores. Over the same period, Global Points of Access increased from 5,720 to 8,275. The GAAP loss before taxes increased from $14M in 2018 to 37M in 2019 to $64M in 2020. The Net Loss in Q1’21 was $3.1M , compared to a $11.5M loss in ’20. Adjusted EBITDA looked (predictably) higher: $124M in 2018, $146M in 2019, $145M in 2020, and $46.4M in Q1’21, up from $36.4M.

The Global Points of Access grew further in Q1’21, to 9,077, up 9.6% in just three months. As presented early in the 200 page prospectus: “Krispy Kreme doughnuts are ….universally recognized for its melt-in-your-mouth experience. One differentiating aspect …is our Theater Shops with our ‘Hot Now’ light….the most awesome doughnut experience imaginable….we are an omni-channel business, via (1) our Hot Light Theater and Fresh Shops (2) delivered fresh daily through high-traffic grocery and convenience stores (3) e-Commerce and delivery and (4) our new line of packaged sweet treats offered through grocery, mass merchandise and convenience retail locations.

THE VALUATION

On a pro forma basis after the IPO, there will still be about $630M of remaining debt (net of $78M cash). Adding that to the equity value (at the $22.50 offering price) of $3.6B provides an Enterprise Value of about $4.3B. If we assume a current annual EBITDA run rate of about $185M, the Enterprise Value would be twenty three times.

For those observers that like to look at old fashioned EPS (even if it is Adjusted) Adjusted Net Income was $42.3M in calendar 2020 (compared to the $11.5M GAAP Loss), or about $0.26 on the 160M shares to be outstanding.  Adjusted Net Income in Q1’21 was about $0.11/share, up from about $.07. The offering mid-price of $22.50 is therefore about 85x calendar Adjusted Net Income and 51x the annualized Q1’21 Adjusted run rate.  We don’t know what the company or the underwriters are projecting and, if (or when) the current $185M Adjusted EBITDA run rate (and the Net earnings) can increase substantially. If so the fundamentals would obviously catch up to the valuation.

We don’t believe the outlook is risk free. When the last IPO took place, in 2000, customers were lined up for blocks around a newly opened location. Not so much today.  We suggest investors wait for a more advantageous entry point.

Roger Lipton