Krispy Kreme stock tanks 24% as McDonald’s deal stalls and outlook pulled
Pranjal Chandra | May 08, 2025, 23:47 IST
( Image credit : TIL Creatives )
Krispy Kreme's shares plummeted by 24% after pausing its national rollout with McDonald's due to weak sales and profitability concerns. The doughnut maker also withdrew its 2025 guidance, leading to skepticism from Wall Street.
Krispy Kreme shares collapsed 24% on Thursday, wiping out nearly a quarter of the company’s market value, after the doughnut maker abruptly paused its much-hyped national rollout with McDonald’s and withdrew its 2025 guidance amid growing losses and weak consumer demand.
The dramatic selloff comes as the company faces mounting skepticism from Wall Street with Truist downgrading the stock and expressing open doubt about management’s ability to deliver on its promises.
Krispy Kreme, once betting big on a full-scale integration with McDonald’s U.S. stores, announced it will not expand to any more locations in Q2. The rollout had initially brought its doughnuts to more than 2,400 of McDonald’s 13,500 U.S. restaurants, but weak sales and profitability concerns have forced a pause.
CEO Josh Charlesworth tried to strike an optimistic tone, saying, “I remain confident in the long-term national opportunity.” However, he conceded the strategy needs reevaluation, saying the company is now working with McDonald’s to “identify levers to improve sales.”
Once a market darling, Krispy Kreme stock has lost more than 70% of its value in the past year, with its market capitalization now sitting below $600 million. That’s a steep fall for a brand with near-iconic recognition and a stark indictment of its current business strategy.
Wall Street analysts are sounding the alarm. Truist’s Bill Chappell wrote in a downgrade note, “We are shocked by the speed at which the story fell apart… It will likely take several quarters before we or investors can regain confidence.”
The breakdown of the McDonald’s deal appears largely driven by profitability concerns, not demand alone. While early phases of the rollout showed promise, sales dropped below expectations, and the economics of scaling up quickly proved challenging.
Krispy Kreme logged a net loss of $33 million in the first quarter of 2025. Its capital investments to support the McDonald’s partnership such as expanding production capacity have pressured the bottom line. The company has now reported three straight quarters of net losses.
“We are seeing that after the initial marketing launch, demand dropped below our expectations,” Charlesworth told analysts on Thursday. “We’re now reassessing our deployment schedule with McDonald’s as we work toward a profitable business model for all parties.”
Krispy Kreme’s troubles aren’t happening in a vacuum. McDonald’s also reported a 3.6% decline in U.S. same-store sales in Q1, driven largely by middle- and low-income consumers cutting back on restaurant visits due to economic pressure and recession fears.
McDonald’s CEO Chris Kempczinski said the entire industry is feeling the squeeze as foot traffic slows and discretionary spending falls a dynamic that spells trouble for high-margin upsells like doughnuts.
Krispy Kreme is now pivoting toward damage control. The company, which uses a “hub and spoke” distribution model, plans to prune unprofitable locations, potentially shuttering up to 10% of its U.S. retail network. These closures may improve operating leverage, but they also shrink revenue potential a tradeoff Wall Street is watching closely.
The company also withdrew its full-year outlook, citing “macroeconomic softness” and uncertainty around the McDonald’s deal further rattling investor confidence.
Krispy Kreme still enjoys powerful brand recognition, but that may not be enough to carry it through this turbulent stretch. With cash flow under pressure, Wall Street faith faltering, and its biggest growth plan now paused, investors will need more than sugary sentiment to stay onboard.
The dramatic selloff comes as the company faces mounting skepticism from Wall Street with Truist downgrading the stock and expressing open doubt about management’s ability to deliver on its promises.
A national rollout in reverse
CEO Josh Charlesworth tried to strike an optimistic tone, saying, “I remain confident in the long-term national opportunity.” However, he conceded the strategy needs reevaluation, saying the company is now working with McDonald’s to “identify levers to improve sales.”
A $600 million valuation and falling
Wall Street analysts are sounding the alarm. Truist’s Bill Chappell wrote in a downgrade note, “We are shocked by the speed at which the story fell apart… It will likely take several quarters before we or investors can regain confidence.”
Profit problems undercut expansion plans
Krispy Kreme logged a net loss of $33 million in the first quarter of 2025. Its capital investments to support the McDonald’s partnership such as expanding production capacity have pressured the bottom line. The company has now reported three straight quarters of net losses.
“We are seeing that after the initial marketing launch, demand dropped below our expectations,” Charlesworth told analysts on Thursday. “We’re now reassessing our deployment schedule with McDonald’s as we work toward a profitable business model for all parties.”
Broader weakness in restaurant sector
Krispy Kreme’s troubles aren’t happening in a vacuum. McDonald’s also reported a 3.6% decline in U.S. same-store sales in Q1, driven largely by middle- and low-income consumers cutting back on restaurant visits due to economic pressure and recession fears.
McDonald’s CEO Chris Kempczinski said the entire industry is feeling the squeeze as foot traffic slows and discretionary spending falls a dynamic that spells trouble for high-margin upsells like doughnuts.
Cutting back to survive
The company also withdrew its full-year outlook, citing “macroeconomic softness” and uncertainty around the McDonald’s deal further rattling investor confidence.