Krispy Kreme sees 40% surge after striking deal with McDonald’s, experts deem increase ‘completely warranted’ according to Investing.com

Krispy Kreme sees 40% surge after striking deal with McDonald’s, experts deem increase ‘completely warranted’ according to Investing.com
(Updated – March 26, 2024 at 4:51 p.m. EDT)

McDonald’s (MCD) is set to add Krispy Kreme (DNUT) donuts to its menu across the United States by the end of 2026, the two companies announced Tuesday.

DNUT surged nearly 40% in Tuesday trading.

The introduction of Krispy Kreme donuts to McDonald’s restaurants will begin in the second half of this year, with the full rollout expected to take approximately two and a half years.

This expansion is due to Krispy Kreme’s plan to significantly increase its distribution capacity to meet the demands of this new partnership. McDonald’s (NYSE:) will hold exclusive rights as Krispy Kreme’s fast food partner in the United States during this period.

Krispy Kreme operates using a “hub-and-spoke” system, allowing efficient production and distribution of its donuts from production centers to various retail outlets, including grocery stores and gas stations.

This collaboration marks an important step for Krispy Kreme in expanding its market presence. As of the end of December, the company’s products were available in 6,800 third-party outlets.

McDonald’s, with approximately 13,500 U.S. locations and plans to add 900 more by 2027, provides Krispy Kreme with a platform for substantial expansion.

“We believe we can serve about 6,000 restaurants with our existing infrastructure, primarily donuts, which have excess capacity,” Krispy Kreme CEO Josh Charlesworth said in an interview with CNBC.

In their take on the deal, Truist Securities analysts said the partnership represents “a strong development for DNUT, increasing the availability and number of times consumers can try a Krispy Kreme donut.”

“We also believe that the long testing phase (17 months) will reduce risks for both parties in the long term,” analysts say.

“The stock has already jumped over 20% this morning, which we believe is entirely justified. However, we think investors should wait for more color before chasing the stock,” they added .



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