On August 6, Krispy Kreme (NASDAQ:DNUT) reported second-quarter results that read like two different companies wearing the same ticker. Net revenue fell 12.8% to $331.0 million, and the company posted its fourth straight quarterly loss. Yet Adjusted EBITDA jumped 43.2% to $28.8 million, and leverage is finally coming down. For a stock built around a turnaround story, the quarter offered plenty of evidence for whichever side of that story you already believed.
The Turnaround Is Showing Up In The Numbers
The clearest sign of progress is margin. Adjusted EBITDA margin climbed to 8.7% from 5.3%, a 340 basis point jump driven by the US segment, where margin expanded roughly 370 basis points to 8.0%. That coincided with the April completion of outsourced US logistics and a 70.2% cut in first-half capital expenditures, to $16.1 million from $54.1 million a year earlier. Krispy Kreme is also deleveraging. Net leverage fell to 5.4x, down 1.3x from the fourth quarter of 2025, while total liquidity stood at $263.9 million as of June 27. Year-to-date operating cash flow rose to $10.0 million, up $63.3 million, and free cash flow improved by $101.3 million even though it remained negative at $6.1 million.
The capital-light franchise push is gaining traction too. The company refranchised Japan and its western US joint venture in March, added 59 new shops this year, nearly all franchised, and signed deals in the Netherlands, Estonia and Mauritius. Systemwide sales rose 2.6% excluding the now-ended McDonald’s USA partnership, US average revenue per door climbed 33.2% to about $697, and digital sales reached 19.8% of retail sales, up 190 basis points.
Shrinking Footprint, Shrinking Margins Elsewhere
The same restructuring that is lifting margins is shrinking the business on paper. Global points of access fell 13.5% to 15,665, largely due to the closure of roughly 2,400 doors tied to the ended McDonald’s USA partnership, and US segment revenue dropped 25.0% to $172.7 million. International revenue fell 11.6% to $117.3 million on the Japan refranchising, and organic revenue there declined 5.1% on weakness in the UK and Australia. Market Development revenue jumped 142.3% to $41.0 million as refranchising shifted sales into that segment, but its Adjusted EBITDA margin fell 560 basis points to 47.3% because the mix now includes more lower-margin U.S. franchised sales. GAAP net loss narrowed to $19.8 million from $441.1 million, an improvement, but still a loss, and free cash flow has yet to turn positive.
Funds Are Buying Into A Crowded Short
Hedge fund ownership of Krispy Kreme rose to 23 funds from 19 in the prior quarter, which points to institutions adding exposure even as the headline numbers stayed rough. Short interest sits at 19.09% of float, a level that reflects heavy organized skepticism and can fuel sharp moves if sentiment shifts. That combination shows a market that is split on whether the turnaround has already proven itself.
Where The Story Goes From Here
Krispy Kreme is maintaining full-year guidance of $1.25 billion to $1.35 billion in net revenue and $140 million to $150 million in Adjusted EBITDA, alongside a goal of generating roughly half of systemwide sales from franchisees by fiscal 2027, up from about 42% now and 25% in fiscal 2025. The bull case rests on margin expansion and deleveraging continuing at the pace seen this quarter. The bear case rests on whether a shrinking store footprint and softer international markets can still produce the revenue growth guidance assumes.
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