Shares of Krispy Kreme (DNUT -25.64%) plunged 24.4% this week through Thursday, according to data from S&P Global Market Intelligence.

Krispy Kreme delivered a first-quarter earnings report that fell well short of expectations. Even though a decline in revenue was expected, due to a divestiture last year, Krispy Kreme's revenue came in even worse as the company continued to invest in expansion.

As a result, profits reversed to losses, forcing management to take on more debt and cut the company's dividend.

When the dividend becomes a donut

In the first quarter, Krispy Kreme saw revenue decline 15.2%, although organic revenue was down a more modest 1%. Still, that figure missed expectations by a fair amount. Even though sales came in soft, the company continued to invest in growth, expanding its global points of access by 21.4% relative to last year.

As a result of the softer-than-expected revenue per store but increased costs of that store growth, adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) fell a severe 58.8%, and adjusted net income fell from an $11.3 million profit last year to an $8.8 million loss.

Describing the results, management pointed to a "challenged" consumer, specifically noting, "macroeconomic, weather, and inflationary factors."

As a result of its desire to keep growing despite sinking sales per store, management decided to cut the company's dividend payout to zero, even as it took on more debt.

Image source: Getty Images.

Aside from the dividend cut, another troubling aspect was that Krispy Kreme said that it would not expand into any more McDonald's (NYSE: MCD) restaurants in the second quarter of this year. In the release, management said, "The Company is reassessing the deployment schedule together with McDonald's while it works to achieve a profitable business model for all parties."

This is somewhat troubling as the McDonald's partnership had been touted by management as a key potential growth driver; however, it looks as though the arrangement might not yet be profitable for Krispy Kreme at current sales levels.

Are cash-strapped consumers skipping dessert?

One potential bright spot was that management guided for things to improve a bit in the second quarter, with revenue guidance between $370 million and $385 million, along with adjusted EBITDA of $30 million to $35 million.

So, at least things aren't expected to get worse. That being said, Krispy Kreme is still making losses, and its debt has grown to $935 million as of the end of the quarter.

While the slashed dividend will help conserve cash, the high debt load combined with a highly uncertain macroeconomic picture makes Krispy Kreme a risky bet, even after its 24.4% decline this week.