Q4 2022 Krispy Kreme Inc Earnings Call
Ladies and gentlemen, good morning, My name is Abby and I will be your conference operator today.
At this time I would like to welcome everyone to the Krispy Kreme fourth quarter and full year 2022 earnings call.
Today's call is being recorded in all lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press the star key followed by the number one on your telephone keypad.
If you would like to withdraw your question Press Star one once again.
Thank you and I will now turn the conference over to Rob Ballew, Vice President of Investor Relations you may begin.
Thank you good morning, everyone and welcome to Christie groups fourth quarter and full year 2022 earnings call. Thank you for joining US today, our earnings releases and accompanying earnings presentation deck are available on the Investor Relations portion of our website at investors that Christy Green Dot com.
Joining me on the call. This morning is Mike <unk>, President and Chief Executive Officer, Josh Charlesworth, Global President and Chief Operating Officer, Jeremy <unk>, Chief Financial Officer. After prepared remarks, there'll be a question and answer session.
Before we begin I would like to remind you that this call contains forward looking statements made pursuant to the safe Harbor provision of the private Securities Litigation Reform Act of 995, including statements of expectations future events or future financial performance forward looking statements involve a number of inherent risks and uncertainties and we caution investors that these risks could cause actual results to differ materially from those contained in.
Any forward looking statements.
These factors and other risks and uncertainties are described in detail in the company's Form 10-K filed with the SEC on March 11, 2022 forward looking statements made today speak only as of today. The company assumes no obligation to update to update or revise any forward looking statements, except as may be required by law. Additionally.
Additionally, today's call will include certain non-GAAP financial measures a reconciliation between non-GAAP financial measures and the closest comparable GAAP measures can be found on the company's fourth quarter 2022 earnings release and form 8-K filed today and our Form 10-K, which will be filed with the SEC. Later. This month will also be made available on our website investors doctors be creating doctor.
With that I'll now turn the call over to Mike.
Good morning, and thank you everyone for joining US today, we are pleased to share our fourth quarter and full year 2022 results as organic growth accelerated from the third quarter driven by our continued successful execution of our Omnichannel strategy and strong performance of our premium offerings for celebration events in.
Holiday.
I want to start today's call by thanking our crispy three years.
Our team members.
We're driving another strong quarter and year revenue growth.
In 2022, we had positive organic growth in every country around the world. Despite a turbulent macro environment and double digit organic growth in all three segments in the fourth quarter.
Thank you without your efforts and dedication this would not be possible.
Since 1937, we've been serving our iconic original glazed donut to customers and it's always been about sharing moments like friends and family and community.
As an affordable indulgence today, we love the fact that more than 80% of our donuts are bought to be shared with others, including as gifts.
In 2020% to 36% of our customers bought our donuts or a party or special event in their lives up from just 10% a few years ago.
The purpose of our company is to touch and enhance the lives of others through the joy that as Christie free.
We are committed to positively impacting the world by loving our people our communities and our planet.
In the fourth quarter, we wrapped up another great year for fundraising.
And in total raised more than $40 million globally in 2022 for local communities, a roughly 25% increase from 2021.
Fundraising has long been an integral part of crispy creamy purpose as part of our efforts to give back and support local communities and issues, while generating brand love.
We also focused on reducing waste and increasing landfill diversion efforts and continue to engage and get back to local communities across the world through volunteer in.
The land for free and creating moments of joy through innovative donuts, we're constantly looking to engage people across the globe and fund enjoyable way that really connect people with increasingly creating a powerful way.
Turning to 2022, we had a great year on the topline as organic revenue grew over 12% led by a 14% increase in breast points of access globally to nearly 12000 in total at the end of the year.
Growth was strong across the world, especially king and the year as we saw double digit organic revenue growth in all three segments in the fourth quarter with performance accelerated in the U S. Krispy Kreme business market development and in retail in the UK.
We sold a record $1 63 billion Donuts in 2022.
163 billion, that's a lot of donuts.
All delivered fresh daily to more than 30 countries around the world.
The fourth quarter accentuated a great year for our brand as we had highly successful seasonal global campaigns that drove an increase in volume, especially at Halloween and winter holidays, where we saw very strong performance across the world.
These global campaigning so the path forward for significant events and holidays, as we will be able to leverage marketing past media coverage and bring partners across many or all of the countries principally cream and our franchise partners operator, driving increased efficiencies on both the top and bottom line for.
For the full year, we earned more than 35 billion media impressions, highlighting the true power of our incredible brand.
Also strengthening our omnichannel capabilities in the fourth quarter was our e-commerce efforts.
In the U S that included expanding availability of specialty donuts and more targeted marketing efforts. Additionally, insomnia benefited from the expanded radius of warm cookie delivery of up to 10 miles.
These efforts led to more than a 20% increasingly ecommerce revenue in the fourth quarter compared to a year ago and led to a 260 basis point increase in sales mix of E. Commerce to 18, 3% for the company as a whole during the quarter.
The fourth quarter was our strongest in e-commerce since the pandemic and we continue to see significant opportunity to grow in this channel.
Our performance in the fourth quarter in the U S and Canada segment was strong led by successful premium offerings effective pricing actions and higher E Commerce revenue.
This quarter in the U S for the first time ever we sold all three seasonal specialty donuts and our DSD doors.
This led to record weekly sales in the U S of $620, our DSD door, highlighting the benefits of a complete omnichannel model approach organic revenue growth for the segment was 12% and margins expanded 50 basis points to our highest margins during 2022.
We saw near cookies had another great quarter with 24% revenue growth driven by strong same shack sales and very high productivity from the 2022 class of new shops.
In <unk> <unk>.
<unk> increased to.
$850000 up 8% from the previous year, and we opened more than 20 cookie shaft last year the.
The capital efficiency and some are tricky shop is fantastic as set insomnia is founder and 20 years CEO highlighted our recent investor day. The payback for these new stores is roughly one year or around 100% ROIC.
Thanks to four wall margins approaching 30%.
The recent class of new stores has been one of our best return classes ever we are focused on accelerating <unk> growth as we grow from our current 231 shops today to a total addressable market. We believe a more than 4000 locations with the goal to eventually ramp up to nearly 100, new cookie shops per year.
We truly believe insomnia cookies will be the next principally creating and we plan to expand globally. This year into the UK and Canada.
In our international segment, where our hub and spoke model is more about we continue to grow <unk> points of access and see significant upside from where we are today.
In 2020, we added nearly 600 points of access internationally with growth across all countries.
This led to 18% organic revenue growth in 2022 and sales per hub increased 8% to nearly $10 million despite significant FX wins from the stronger dollar.
We saw strong progress in Mexico in particular in 2022, where point Tabak, that's increased by nearly 40% to more than 550.
This led to a 24% increase in revenue and more than 100 basis points of adjusted EBITDA margin expansion for Mexico for the year despite significant inflation.
We also signed a record number of international development agreements in 2022 with eight new agreements from both existing and new partners.
Interest from high quality franchise partners remains robust and we are confident in our ability to sign three to five new countries a year moving forward, we expect to open five to seven new countries in 2023, including embrace.
Our total to more than 35 countries by the end of this year.
As we look ahead, our relentless focus on capital light expansion of our Omnichannel model will continue we continue to gain confidence in our existing DSD channels and are now excited in growing our fresh business to new channels, such as <unk> club and drug.
That's why we had high conviction in our ability to grow to more than 75000 points of access globally, an increase from our prior target of 50.
In addition to expanding DSD. We will also continue our work to align our specialty donuts across all channels and expanding our e-commerce capabilities in 2023, and we will continue to accelerate the growth of insomnia cookies.
Krispy Kreme has great momentum right now as we enter 2023 and we remain confident in our long term 2026 expectations. We highlighted just a couple of months ago at our Investor Day in December .
Before turning the call over to Jos I would like to welcome Jeremy <unk> as our new Global CFO , who started last month, Jeremy not only brings with him more than 20 years of financial leadership, including 12 years as CFO .
But also global in significant brand in CPG experience all skills critical to our successful going forward.
His appointment allows us just to fully embraces role as global President and COO driving performance in our larger equity markets are.
Round, the world and operating excellence throughout the company with that to closeout his final quarter as CFO I'll hand, the call over to my friend, Mr. Charles worthy.
You talked about the fourth quarter financials and expand more on what we're seeing in the U S operation.
On a personal note.
Just has been a tremendous partner for me and the crispy creamers over the past six years and we are clearly a much stronger business because of his leadership not just for the individual but also just the.
Focus on how to drive the business forward with financial acumen.
And it's because of that we're able to attract a great partner like Jeremy and.
And I look both as Jeremiah continuous starts his new role and Jos amount of really takes on the president role and thinks about the operations execution, which will really strengthen krispy kreme as we go forward.
Thanks, Monica and a warm welcome to Jeremiah as well I'm just thrilled to have him on board and look forward to his leadership of our terrific finance teams around the Krispy Kreme world.
I'm confident that <unk> will help us drive strong performance and create shareholder value for years to come.
As Mike said, we saw strong growth across all of our reporting segments in the fourth quarter with net revenue up 9% year on year to $405 million.
Organic revenue, which excludes the impact of acquisitions and changes in foreign currency grew 12, 5% an acceleration from the summer trends driven by pricing our premium seasonal innovation the growth have delivered fresh styling donuts sold in grocery and convenience stores and e-commerce.
Adjusted EBITDA grew 17% in the fourth quarter to $56 million.
Or 25% in constant currency.
Once the $4 million impact of the stronger dollar is taken into account.
Our 2022, adjusted EBITDA was up 7% in constant currency with the full year impact of the stronger dollar a $10 million.
Pricing hub and spoke of efficiencies and G&A explained the 90 basis points year over year increase in adjusted EBITDA margins to 13, 8% in the fourth quarter.
So low levels of elasticity from the pricing actions, we took in the second half of 2022 with consumers domestically and globally remaining enthusiastic about premium specialty donuts for sharing occasions and celebratory events.
So a small GAAP net loss of $1 million in the fourth quarter. However, net income would have increased over the prior year is not for one time overwhelmingly noncash expenses of $12 $4 million related to our previously announced optimization of our poor performing hubs with ounce.
Folks in the U S.
We do not expect significant expense moving forward related to these efforts.
Adjusted net income for the quarter increased 27% to $20 4 million.
And adjusted diluted EPS in the fourth quarter was 11.
An increase of 38% or 63% in constant currency.
In the U S and Canada business segment total revenue increased 11% in the fourth quarter to $277 million and organic revenue growth was 12% and.
An increase on our third quarter performance with strong growth in fresh Donuts SaaS, both on and off premises, explaining a 15% increase in trailing 12 months sales, but up to $4 6 million adults.
We also saw another great quarter from insomnia cookies, which continues to benefit from growth in its e-commerce delivery channel.
EBITDA for the U S and Canada in the fourth quarter increased 16% to $37 million.
With margins, increasing 50 basis points year over year to 13, 3%.
<unk>.
This reflects the successful pricing taken in the second half of the year the efficiency benefits to our hubs spokes from the growth and delivered fresh state off premises sales and an improved performance in subs with apps folks. These.
These factors more than offset over 20% ingredient cost inflation and high single digit salary and wage growth.
2022, and has been a record year for our delivered fresh data channel now accounts for 21% of sales up from 17% in 2021.
This reflects both a 10% increase in dual served to 5700 and a 10% increase in average weekly sales per dose to $580 in the U S for 2020, reflecting both successful pricing and the addition of specialty Donuts previously only seen in our donut shops.
In the fourth quarter, we added another 21 doors, mostly New York and L. A.
As we see every year. This number is lower than the other quarters due to the preference of our trading partners to limit changes to their floor space during the busy holiday period.
We have already seen a return to the prior growth rate so far this quarter, including the recent addition of target supercenters and continue to see a huge opportunity to increase those across the country, both from existing and new customers as well as growing the average cents per door.
<unk> sales continued to benefit from the addition of more specialty donuts like the crowd pleasing Bischoff range Valentine's Donuts, we sold recently in the U S. We're also.
So rolling out more fresh covenant displays in grocery stores, which typically lead to a 30% to 70% increase DSD sales per door, but less than a $10000 investment.
Also in the U S. We've been making significant progress in the optimization of our shop network during.
During the fourth quarter, we closed an additional six low performing shops, bringing our total number of closures in 2022% to 14, we expect to close seven more in 2023 largely in the first half of the year. As a reminder, these are mostly low revenue hubs without spokes with flat or negative EBITDA margins. We're also.
So converting some hubs without spokes previously considered unsuitable for DSD to serve DFT doors in new ways, such as closing the lobby and using it to stage Donuts ahead of the late night shipments.
Others were compared to the other way into fresh shops. As a result, we ended the year with 137 hubs with folks and increase of eight from the prior quarter and 99 hubs without specs down 20 from the prior quarter.
Now moving to our international segment net revenue grew three 3% in the fourth quarter to $93 million.
With FX headwinds, creating an 8% drag during the quarter due to the stronger U S dollar.
Organic revenue increased 11% led by the double digit growth in Mexico, and Australia, driven largely by DSD <unk>.
International sales to hub increased 8% $9 to $9 8 million despite the FX headwinds.
International adjusted EBITDA for the fourth quarter declined slightly to $25 million, but would have increased by nearly $3 million in constant currency.
Driving that improvement from the last two quarters was successful pricing actions and seasonal specialty donuts in the U K as well as hub-and-spoke efficiencies associated with the strong growth performance in Mexico.
The UK saw adjusted EBITDA margin back over 20% in the fourth quarter, our best performance since the first quarter of 2022, and Mexico saw its best ever margin performance approaching 30% in the fourth quarter.
In terms of the business segment market development, which is made up of our franchisee businesses around the world and equity owned Japan market.
Total revenues in the fourth quarter increased 11% to $35 million, even with a 13% impact from FX headwinds and our franchise acquisitions in fact organic growth in the quarter was a very strong 23% with great performances in our international franchise markets and an equity of Japan, which saw constant currency revenue growth.
Is 40% as we accelerate our DSD expenses.
Adjusted EBITDA in the full quarter for market development increased 11% to talk with $3 million, Despite a roughly $1 million negative impact from FX headwinds.
Adjusted EBITDA margins increased 20 basis points to 35, 4% in the fourth quarter compared to the prior year and would have been higher if not for a mix shift due to a very strong organic revenue growth in equity on Japan.
As a reminder, moving forward, Canada is moving out of the U S segment and into the market development segment for 2020 to better reflect the significant opportunity ahead of it and to match with changes in our reporting structure.
Our fourth quarter earnings presentation on our IR website as 2022 historical performance with Canada by quarter and for the full year two assisted modeling.
I'll now turn the call over to Jeremy to share his priorities as our new CFO give more detail on the balance sheet and discuss our 2023 outlook Joe Bob.
Thanks, Josh and good morning, everyone I'm very excited to be here at Krispy kreme with such a beloved brand and a great team across the globe.
I look forward to getting another team and developing a deeper understanding of the business over the next few months.
As I take the reins as CFO my focus will be on ensuring we are increasing shareholder value.
By delivering consistent top and bottom line results improving performance throughout the business and driving higher return on invested capital.
Our balance sheet is strong and the business generated $32 million.
Our free cash flow in Q4, leading to 15% cash conversion in 2022.
Our existing debt obligations go current this June as.
Such we expect to refinance our existing term loan a and revolver debt at similar terms to our current facilities. This year.
It's worth noting our interest rate hedge that fixed approximately 70% of our outstanding debt will remain in place through June 2024, even after refinancing.
We expect to continue to decrease our net debt leverage ratio over time as well as reduced our dependency on supply chain financing. This is a priority. This year as those rates have increased more than our term loan a and revolver as such we plan to reduce our supply chain financing a bit faster, while paying down our term loan a bit slower than previously planned in 2023.
We expect to reduce our supply chain financing by $50 million to $75 million this year and be around three five times net leverage by year end 2023 remaining on track to be between $2 <unk> and.
And two five times net leverage in 2026.
This morning, we introduced more detailed 2023 guidance in line with our December Investor Day outlook.
This includes growth at 9% to 11% in organic revenue.
An 8% to 10% and net revenue.
Net revenue growth is modestly lower than our organic growth due to foreign exchange and the closure of approximately 20 lower performing shops in the U S that Josh discussed.
In 2023, and we expect $205 million to $215 million, and adjusted EBITDA, which equates to 8% to 13% growth.
We expect to deliver between 31 to 34 of adjusted EPS, which.
Which represents 7% to 17% growth or an increase of 10% to 21% in constant currency.
Alright, adjusted EPS guidance includes expected net interest expense for the year between $39 million and $43 million, which is an increase of 5 million to $9 million.
We expect capital expenditures of $105 million to $115 million, a roughly six 6% of revenue down from just over 7% in 2022, we.
We expect to open 30 to 40, new insomnia cookies shops in approximately 10 company built hubs in 2023.
Our 2023 guidance includes a modest headwinds from foreign exchange for the year based on current exchange rates of roughly a negative 1% impact on revenue growth and approximately $3 million hit to adjusted EBITDA each 1% move in the U S. Dollar index is a little over $1 million impact on adjusted EBITDA on an annualized basis.
Roughly half of our pre corporate expense adjusted EBITDA is outside the U S.
From a cost of goods sold perspective, where more than 90% covered on our major commodities, such as sugar wheat and edible oils for 2023 at an average increase in the high single digits. These.
These commodities make up roughly half of our spend.
On our remaining spend we have contracted pricing in place and expect low double digit inflation. Both of these are lower than we experienced in 2022.
Inflation on our largest expense labor is expected to remain elevated in the mid to high single digits as we continue to invest in our crispy creamers across the globe.
We expect pricing will generally offset inflation for the full year.
While we don't provide quarterly guidance I did want to provide some color to assist with our cadence for modeling bottom line performance in 2023, given we expect somewhat similar quarterly organic revenue growth throughout the year.
We expect FX headwinds to continue in the first and second quarter as the dollar lapsed tough comps. However, we expect modest FX tailwind in the back half of 2023.
Second we expect lower discounting in the U S segment during the summer months compared to last year as we cycle the beat the pump promotion and focus on premium specialty donuts.
Third commodity costs will be the highest of the year in the current quarter, increasing roughly 15% higher compared to Q1 2022. However, we expect inflation to soften as the year progresses.
To close I'm very excited about the long term growth potential of <unk>.
We have good momentum in the business as you heard from Josh in our Q4 results and have high degree of confidence that we can meet or even exceed our long term outlook in 2026, and we provided at our Investor day.
Operator, we can open the call up to Q&A now please.
Thank you and at this time I would like to remind everyone in order to ask a question Press Star and then the number one on your telephone keypad, we will pause for just a moment to compile the Q&A roster.
We will take our first question from David Palmer with Evercore ISI. Your line is open.
Yes.
Thank you.
I wanted to just ask you if you wouldn't.
And going through some of the gives and takes with regard to the EBITDA margin this year, which I guess would be roughly flat.
As per your guidance and what are some of the the.
The offsets to what would seem to be good guys in the spoke.
Expansion as well as.
Some of the optimization of the store base domestically.
There are some of the headwinds or maybe offsetting that.
And then the other thing I wanted to ask you about is is that that test with mcdonalds.
When when will you know that like what's the timeline for that testing and what stage are you out with that thank you.
Hi, David This is Josh.
So, yes, I'll start with the.
Guidance question and answers.
Perhaps for Mcdonald's.
First thing to say is our guidance for 2023 is consistent with the long term outlook that we shared at our Investor day in December and you're right. It does reflect the disciplined rollout of hub and spoke around the world maximizing the utilization of our hubs in the U S. In particular in driving.
Sales per hub.
You are specifically around the margin puts and takes in the biggest the biggest driver is indeed U S and Canada margins, reflecting the flow through benefit to that hub and spoke model. These off premise sales, which create efficiency down to the bottom line and our hubs in the U S.
That.
Yes.
Is the biggest driver as a partial offset from FX about three basis.
Basis points from FX, and then the rest of the world.
Assuming.
Is largely flat.
During 2023 from a margin point of view, but all all the segments around the world will be.
We expect it to be growing pretty balanced sort of double digit organic growth rate. So.
It's a balance.
Guidance that we think reflects the long term trends that we see and indeed some of the recent success of ACA.
<unk> pricing.
Premiums out of a tree.
<unk> done our promotions.
Hey, David how are you doing that too much.
Terms of Mcdonald's.
We'll let you know when we're ready.
<unk> discussed that I think.
What we're really able to talk about right now.
We disclosed them December 75 points of access, which is being driven by the <unk> the drug and the club business, what we've learned in the tests.
But we can actually manage the operations rigor the logistics rigor of how do you manage a <unk> our customer from.
From the timing demand the quality demand and the execution and how it works seamlessly with our DFT routes system, that's what's pretty critical for us to get that understanding on how our Permian also works with another brand as well. So those are the pieces that while we continue to come back and say it looks like we haven't very clearly.
We have a growth story about where we can go from a channel perspective, and then how to manage that along the way of keeping up to date on the road.
Thank you.
And we will take our next question from Sarah Senate Wire with Bank of America. Your line is open.
Great. Thank you.
Couple of questions if I may please.
Understood.
So you take that Pete.
We're lapping that.
My understanding was that it initially actually was a pretty good.
Driver of top line driver and then maybe the impact with diminished over time. So maybe it was too long, but I'm wondering if there's still room for these kinds of like price point promotions to drive trial or your is your observation that you can do that as effectively.
With higher margins with the premium donuts.
Those kinds of initiatives just as you think about getting more people.
Triangle product. So that's my first question and then a quick follow up.
Sure thing good morning.
Yes, I mean, we see.
Christi train original glazed in particular as our affordable sweet treat both for personal consumption.
More easily shared and even given to others. So.
Absolutely.
Though we also use it.
Way of promoting in introducing encouraging people to to try the brand will come in more often than last year, you're right beat the pump resonated really well with consumers. They are really excited about it.
And Ken for again and again in some cases, what we learn from that.
Is that we still believe in selective promotion price promotion.
We recently did for example, $20 23 for the January the first two.
It doesn't donuts, we did a friday, the 13th copper as well.
Just in January .
Have a great positive impact well received so we will continue to do that selectively whilst at the same time.
Also driving innovation marketing activation and excitement around our premium specialty Donuts, we just did that in January with the <unk> range and.
Valentine's.
Doughnuts and specialty Hershey range just over the last few days were really popular as well so.
We will apply.
<unk> strategy.
Going forward in <unk>.
I'm sure you'll be able to look out for good deals at times during 2023 as well.
Great. Thank you very much and then just.
Quick other question was on talk about capacity and can you give us leverage.
We are seeing hubs because I think.
At least the volumes are lower than what you've done in Europe . So there is potential there and then adding on but I think in at least one case you have a partner where you kind of get a single job in the may distribute and I was wondering.
Yes.
As youre thinking about signing some very big partners in the U S. In Q ISR with a lot of my sort of local doors is that something that you would contemplate here a year.
I'm committed to controlling all the distribution.
In this market. Thank you.
Our philosophy is to control the quality and make sure the donuts fresh.
Always well manage through the pipeline to the consumer and indeed.
Any unsold a replace a fresh loans.
The next day. So that's all that's all priority that has been.
He can also partner with the customer as long as they maintain that freshness quality mindset and do things like you mentioned I think youre, referring to we have arrangement.
Australia with our customer there.
They will come and pick them up and distribute through that network and that's certainly something that.
We will continue to explore as an option where it makes sense as long as they have the distribution capabilities themselves.
Then that so they will consider however, we love to deliver fresh daily model we have.
It.
Breeds efficiency when you can add more drops and get density.
Routes to the optimum and that's how you maximize the profitability.
So we can work with both ways as long as the great Krispy Kreme has always forefront.
Sir I'd only add one thing on it just as you think about the logistics and that expertise and understanding how the drop and each customer is one of those core really interesting pieces adjusted talk about something which is.
The capacity to think about what the customer wants and then ensure that that logistics approach to that because we're still doing the logistics to them regardless of what you need to do so you have to have that expertise across it and thats something.
We've evolved over the past six plus years right.
To do that.
In our model.
Thank you.
<unk>.
And as a reminder.
Binder.
One if you would like to ask a question and.
And we will take our next question from John <unk> with Jpmorgan. Your line is open.
Hi, Great I was hoping to get a sense of some of the legacy DFT accounts some of the ones that had been in place in one and two years out how are they growing from a volume perspective are they.
From a margin perspective and on a given level of sales are you finding them to be much more profitability are much more profitable as you understand things like drop sizes on different days of the week or <unk> or whatever the case, maybe even what the particular store might bear in terms of.
In terms of the ESP.
Just to get kind of a sense. If we can talk about it like this kind of a same store revenue and same store profitability of your DSD accounts that have been around the longest.
Okay.
Hi, John I'll take that.
Assuming you referring to the U S.
I'll take the answer that you have.
We're very pleased with the transformation you're right over the last couple of years to a fresh daily model out to both grocery and convenience customers across the country in.
And you're right there was a.
As we initially implemented those 5700 or so those that we now have.
We definitely saw significant rises in the in the sales.
As they got bedded in.
Consumers noticed them and we've reflected the merchandising and that's actually continuing as we go forward right now we have new customers, which I mentioned earlier, but the existing customers that you are asking about we continue to be able to add more distribution wisdom.
Customers like Wal Mart or cargo Vascepa.
Craig our different banners and different opportunities to distribute across the country a lot of the Dol ads we.
We expect to have all with existing customers in that way and then in terms of the doors themselves by adding more and more of our specialty donuts into the portfolio.
As we've mentioned upgrading to.
<unk> cabinets.
And the other improved merchandising units, we do indeed expect to see higher sales per door.
Going forward just as we did in 2022 I think on the call I mentioned that we saw the sales per door on average increase about 10%.
And we think that the sales per door.
Growth will be a contributor to our overall growth in the U S of the DSD channel.
Again, we expect to be the biggest driver of growth for 2023 going forward. So a healthy healthy store base minimal.
Optimization or rationalization of the doors and continuous growth double digit low double digits.
We expect in 2023, and the use of new DFT dose.
And of the DFT doors that do particularly well versus the ones that might be significantly lagging I mean, what are the real differences that you're seeing are there any patterns that you're now seeing in terms of what determines a good door versus a slower doors. So we really think about this footprint going forward.
Okay.
Well from a dual point of view, it's naturally the traffic of customers that are coming to that real estate.
<unk>.
Work with the customers to make sure that we go into ones.
Commands the number of footfall that would make all of this makes sense and they've got used to that we noted every.
One of our customers.
Stores and half payroll because they've moved moved around.
The units both.
Both the three stores with even more significantly within stores there are certain parts of the store the better obviously the higher traffic.
So you want to be as near as either due to the entrance of the <unk>.
Check out as you can but that doesn't mean it can't work in the <unk>.
Milk section, either and we really work with our customers to optimize this week.
We've seen it work in a big lay out stores like Walmart I mentioned on the call are Super target, we see it working not just in the big box stores that are different grocery stores.
Convenient stores now increasing drugstores.
Rolling out with Duane Reade Walgreens, so, yes, we're seeing different execution.
Have a place.
C stores and even gas stations, we have been able to add one of the things that really makes it work for us is to make sure the route profitability.
Right. So we focus on the number of stops for around the location of the stores on a ramp make sure. We're optimizing that and these are all the areas that we're getting better on over time to make sure. We don't just get the top line, we get the bottom line flow through and efficiencies of the model come ops.
Thank you.
Okay.
And we will take our next question from Brian Harper with Morgan Stanley . Your line is open.
Yes, Thanks, good morning, guys maybe.
Maybe just first is there anything more you could say about kind of your pricing plans, especially given that you're kind of.
<unk> seen more inflation in the first half do you intend to take any more pricing in the current quarter for example, or how are you thinking about that.
Hi, Brian .
I'm, assuming your questions around the U S but.
A lot of this holds for around the world and the <unk>.
Pricing, we have learned is successful.
As long courses, we offer a great product and we've been very focused on that.
In the U S. We took pricing actions as little late last year, we mentioned that before.
In July and October on retail.
And then November on DSD, and we call that offer it was lagging a little bit.
And then from that for 2023.
Definitely.
Being very disciplined about identifying inflation as Jeremy mentioned, we've got a good line of sight to inflation for 2023, even better than we had in 2022.
And as a result, we already took the.
Another small price increase in January on retail low single digit.
We entered the year.
Low double digits effective pricing.
We will.
Adapt to the inflation numbers on a price.
I have a price strategy going forward that adapts to them and both retail on DFT.
It is.
As Jeremy said, we've got a reasonable pretty good view that the inflation will be higher at the beginning of the year. The end of the year and so it will be natural that our price.
Pricing strategy will will follow that.
Okay. Thanks, and then just on the international segment.
Could you help us think maybe a little bit about kind of the pace of growth. There is it fairly even through the year is when will we see kind of some of the new market openings take effect and then also I know that in 'twenty three the <unk>.
<unk> have access growth was more weighted to the first half relative to the second half is that what you expect in 'twenty three as well.
So from.
Country perspective, Brian This is Mike.
We anticipate opening up.
Anywhere between 570 countries. So those will be paced throughout the year fairly evenly what I'm pretty pleased about that is that youll see last year, we were getting to the middle east and even in the African continent allowed this year, we'll be opening up in the South America Central America. The Caribbean is.
Well, alright, and then including Europe .
As well as the probably on the back end of the year. So we see that type of pacing.
From our point of access.
Ends up being fairly.
Consistent where do you see the points of access being driven quarter by quarter with the back end of the year fairly similar right. It's grocers are the doors tend to kind of look at their rationalization around holiday time, So I don't see any of that mean anything different.
Thank you.
As a reminder.
One if you would like to ask a question.
And we will take our next question from Bill Chapell with Trust Securities. Your line is open.
Yeah.
Hey, Good morning. This is Steven mango off a bill Chappell. Thank you for taking my question.
Can you put some question you provided.
Hey, guys I think Sean can you provide us more color on how much of the solid growth in.
And <unk> was driven by the seasonal demand and kind of how are you.
Starting to see some normalization in January and February today, as consumers kind of cut back on indulgent indulgence as post holiday or it has momentum.
Carried over into these months.
Thank you.
Again, yes.
So I'll answer the first one just the consumer.
We think about it right. So our business model again as dozens gifting sharing amongst not a high frequency model.
We even talked about people continue to buy our brands and it doesn't to give to someone else. The affordable indulgent piece is a clear driver, which really helps all of our consumer space about being resilient and then Josh even talked a little bit about the premium amortization that happens as we start to get into the Halloween or the holiday and even for example.
When people say January or this where we actually introduced a very high premium very indulgent product in first part of the year extremely.
Extremely successful and we just finished with our <unk>.
Probably one of our highest.
Days of the year from a concept of what we do across the world and Valentines day, So again from that gifting model.
Very successful Valentine's day. So again this is a gifting kind of business that follows along and Thats, where the model has really changed and is different so let's points of access allows the biggest opportunity that we have from the customers to get it to where they are that is the number one challenge that the app for US is they can't get the Donuts alright.
So here is what it is I believe the second part of the question just related to us anything volume based.
Well I think.
Just as you think about 2023.
We're not assuming any sort of backdrop of economic drove for changes like what we're focused on is the point of access expansion that reflects the number one reason again and again why the consumer may not choose to buy efforts Krispy kreme and they just can't get it. So that's the number one driver of growth getting.
Points of access out to people, making them more convenient through this delivered fresh data channel from an activation point of view. We're also as you mentioned leveraging not just seasonal but other especially done opportunities to take that further to increase frequency to make sure that we're driving the premium growth. So it's definitely not just.
About the seasonal celebration events there.
And in fact as Mark said, we can find the season in January February Checkbook every month of the year when somebody is looking for an indulgent sweet treat.
And so I think when you think about Q1, we expect top line momentum to two.
To continue.
And certainly the evidence so far I would say no.
Change in our consumers' behavior.
Alright, thank you so much.
There are no further questions at this time I will now turn the call back to Mr. Mike Petters skilled for additional and closing remarks.
Well, thank you everybody for being on the call again I'd like to thank all of the Christie premiums really.
Really showed up in the air.
Good day, and 2022 and made our brand really limits purpose every single day.
We look forward to catching up as we move along the year. Thank you very much.
Thank you.
And ladies and gentlemen, this concludes today's conference call and we thank you for your participation you may now disconnect.
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