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Krispy Kreme Doughnuts (KKD) & Dunkin Brands Group Inc (DNKN): Too Late for the Doughnut Party?

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I hope you’ve recovered from your sugar coma from National Doughnut Day last Friday. Two doughnut companies Krispy Kreme Doughnuts (NYSE:KKD) and Dunkin Brands Group Inc (NASDAQ:DNKN) have been battling for the hearts, minds, and stomachs of consumers and their stocks have created quite the party for stockholders.

Krispy Kreme Doughnuts (NYSE:KKD)

A “sugar rush” in doughnut stocks

Both companies have been experiencing the equivalent of a latter day gold rush or “sugar rush” with Krispy Kreme Doughnuts (NYSE:KKD) tripling from its 52 week low of $5.95 and Dunkin Brands Group Inc (NASDAQ:DNKN)’ close to doubling in the last year.

Doughnuts are even conquering the world in the case of Krispy Kreme with the Hot Now (Caliente Ahora, Chaud Maintenant, Heißen Jetzt) sign on at 509 international shops in 22 countries. The company has ambitious (but not as ambitious as the early 2000s) for another 400 overseas with franchise agreements in hand. Plans are also in the offing for 160 more domestic franchises now that a Vice President of Franchise Development was named in January.

Even with a trailing P/E at 48.78 the short interest is decreasing after Krispy Kreme Doughnuts (NYSE:KKD) recently reported super sweet results of 11.4% same store sales and raising guidance. Dunkin Brands Group Inc (NASDAQ:DNKN)’ has a similarly high P/E of 43.55 but offers a 1.9% yield. Krispy Kreme is still a small cap at $1.2 billion and Dunkin a mid-cap at $4.4 billion.

Like Starbucks Corporation (NASDAQ:SBUX) its big-cap competitor, Krispy Kreme Doughnuts (NYSE:KKD) once suffered from overambitious expansion but it also had problems with executive mismanagement and bloated compensation. In 2004 the stock was at $50 and crashed to below $2 by 2009. Talk about a sinker!

Krispy Kreme Doughnuts (NYSE:KKD) has been a speculative stock since 2004 and when I wrote about the company in November the P/E was only at 3.10 with a PEG of 0.7 and it was trading at $6.92. I also wrote analysts expected a 30-40% upside. Wow, were they wrong! As of May 30 the company has now reported 18 consecutive quarters of same store sales growth for one of the turnarounds of the decade. Even Jim Cramer likes the name now.

Dunkin Brands Group Inc (NASDAQ:DNKN) has also been aggressively rebranding itself with a big menu expansion, store expansions (two opened up near me in the last month alone), and a big social media push. National Doughnut Day and other “excuses to eat doughnuts,” as Krispy Kreme Doughnuts (NYSE:KKD) CEO James Morgan put it, have been big sales drivers for both.

Social media is where both are going head to head. For example, leading up to National Doughnut Day, the most important day of the year for doughnut companies, both had numerous Facebook posts and tweets as an unMetric infographic shows . However, Krispy Kreme Doughnuts (NYSE:KKD) beat out Dunkin Brands Group Inc (NASDAQ:DNKN)’ on actual engagement despite Dunkin’s more than double the number of Facebook fans. Interestingly, Dunkin’s number of Facebook fans have doubled in the last year while Krispy Kreme’s has remained flat.

While Krispy Kreme Doughnuts (NYSE:KKD)’s original glazed doughnut can’t be beat especially when fresh off the assembly line called “The Doughnut Theatre,” Dunkin’ has a much wider variety of doughnuts, coffee, coffee drinks, breakfast sandwiches as well as the Baskin-Robbins ice cream, a fact often forgot in analysis of the stock. Baskin Robbins is the world’s largest specialty ice cream chain. Summer is officially here in less than 2 weeks, don’t forget.

Add to that there’s Dunkin’s foray into the savory sandwich (ham and cheese, grilled cheese on Texas toast and turkey and cheddar, tuna wraps, and chicken wraps) all day menu market aiming directly at McDonald’s Corporation (NYSE:MCD). Dunkin Brands Group Inc (NASDAQ:DNKN)’s newest breakfast sandwich, which debuted on National Doughnut Day, a decadent concoction of bacon and a fried egg inside a sliced glazed doughnut (only 360 calories), sure sounds more tasty than the new Eggwhite McMuffin. Dunkin’ is also challenging Yum! Brands, Inc. (NYSE:YUM), privately held Chik-Fil-A, and others with its new chicken sandwiches.

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