Krispy Kreme downplays impact of industrywide driver, labor shortages
Krispy Kreme CFO and COO Josh Charlesworth cited a record hiring spree as proof the company was sufficiently staffed
Waning COVID pandemic may provide cure for labor shortage
Leuthold Funds chief investment strategist Jim Paulsen provides insight into the U.S. labor shortage.
Krispy Kreme is adequately staffed to expand its delivery operations in the U.S. despite an ongoing nationwide labor shortage that has made it difficult to find drivers, executives asserted during an earnings call this week.
The doughnut maker hired a record 2,100 employees during a strong third fiscal quarter in which net revenue surged 18% to $342.8 million. Krispy Kreme attributed the success in part to an ongoing expansion of its "Delivered Fresh Daily" model, where doughnuts are made at hubs and delivered to grocery stores, big-box retailers, and other partners.
Krispy Kreme CEO Mike Tattersfield noted a difficult labor market was complicating its efforts to expand the delivery network.
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Photo courtesy of Krispy Kreme (Krispy Kreme)
"Wage inflation is also impacting our costs as anticipated, along with labor shortages," Tattersfield said during a call with analysts. "In particular, we’re seeing a lack of available drivers to run routes as we continue to build out our hubs and spokes."
Companies across various sectors, including the restaurant, food service and retail industries, have noted a shortage of available workers in recent months as the U.S. economy recovers from the COVID-19 pandemic. Wages have steadily increased as employers compete to fill key roles, though rising inflation has prevented many workers from seeing the benefits of higher paychecks.
Krispy Kreme original glazed doughnuts half dozen box (iStock)
The labor shortage led Truist Securities analyst Bill Chappell to lower his price target for Krispy Kreme this week, citing "acute labor shortages and wage inflation" that would "slow the company’s expansion of the company’s hub-and-spoke model and slow top-line growth over the next few quarters."
While they acknowledged the labor shortage, Krispy Kreme executives pushed back on the notion that the company’s expansion plans were being limited by a lack of drivers. Krispy Kreme CFO and COO Josh Charlesworth cited the record hiring spree as proof the company was sufficiently staffed.
"We don’t have an issue in the fresh doughnut business with growth when it comes to labor availability," Charlesworth said. "On drivers, we are expanding and adding new routes in parts of the U.S. and of course, expanding of business in this labor market is challenging, but thus far, with the level of recruitment and the attraction of coming and working at Krispy Kreme, we hired 2,100 people in the third quarter, it’s the highest in our history in the U.S. We’re able to match the growth needs that we have."
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"In terms of our ability to expand relatively speaking, it’s just not a challenge for us even in this marketplace," he added.