By Connor Hart

Krispy Kreme said fourth-quarter revenue fell after the doughnut company exited lower-traffic distribution points, even as margins improved amid the chain's ongoing turnaround.

Revenue fell 2.9% to $392.4 million during the recent quarter, reflecting the company's decision earlier in the year to pull out of underperforming locations. Organic revenue fell 3.9%.

As it closed underperforming doors, Krispy Kreme began reshaping its distribution model to prioritize sales in higher-traffic locations with retail partners such as Walmart, Target and Costco, Chief Executive Josh Charlesworth said.

"We saw really meaningful progress in the fourth quarter on that turnaround, which shows the plan is working," he said in an interview. The company added roughly 1,100 high-traffic locations last year while completing its exit from less profitable stores, positioning itself to return to growth in 2026.

Krispy Kreme ended 2025 with about 7,160 fresh-delivery locations, nearly 200 more than at the end of the third quarter. The company guided for systemwide sales to grow 2% to 4% in constant currency this year.

The outlook came as the company widened its fourth-quarter loss to $29.1 million, or 17 cents a share, from a loss of $22.2 million, or 13 cents a share, a year earlier. Adjusted earnings of 9 cents a share topped analyst expectations of 3 cents a share, according to FactSet.

Operational improvements are supporting Krispy Kreme's turnaround, Charlesworth said, with margins rising in the latest quarter thanks to optimized production, increased productivity and an outsourcing program for logistics that has reduced costs.

The company is also exploring technology solutions, including artificial intelligence, to support its operations. While AI isn't a major factor in day-to-day production currently, it is being used in back-office functions such as demand planning and route management, he said.

"AI isn't a big part of the productivity journey so far," Charlesworth said. "It's more down to optimizing production, looking at yields and making sure our shops have the right people at the right time."

To meet changing consumer preferences, Krispy Kreme has introduced smaller portion options, including bite-sized and mini doughnuts, and the company plans to launch a line of mini cake donuts later this year.

The company also positions its brand as a treat for special occasions. The majority of the company's doughnuts are purchased for sharing, typically two to three times per year, often around holidays or events such as Valentine's Day and Halloween. Younger consumers drive much of the company's traffic, with shoppers under 35 representing more than half of business.

"They really enjoy those special occasions," Charlesworth said, adding the company leverages social media and its loyalty program to keep younger consumers engaged with the brand.

Looking ahead, Krispy Kreme is shifting toward a franchise-led growth model, particularly in international markets, Charlesworth said. The company recently announced the refranchising of its Japan operations and it expects to complete additional refranchising deals this year.

Currently, company-owned operations account for roughly 75% of systemwide sales, but the company aims to reduce that to about 50% by the end of the year.

"This is part of an overall strategy to grow with a more capital-efficient, right-size approach while developing new distribution and expansion opportunities," Charlesworth said.

Write to Connor Hart at connor.hart@wsj.com

(END) Dow Jones Newswires

February 26, 2026 06:47 ET (11:47 GMT)

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