JPMorgan Downgrades Krispy Kreme On Sales Pressure From Paused McDonald's Partnership — But Retail Stays Optimistic

Last week, Krispy Kreme withdrew its annual forecast, citing macroeconomic uncertainty.

JPMorgan downgraded its rating on Krispy Kreme (DNUT) on Wednesday following the donut company's dire quarterly report and decision to pause its McDonald's partnership.

The investment firm lowered its rating to 'Neutral' from 'Overweight,' with no target price, according to The Fly.

Last week, Krispy Kreme withdrew its annual forecast, crashing the stock over 16% to a lifetime low.

The company cited a challenging macroeconomic environment and said it would focus on deleveraging, profitable growth in the U.S., and franchise-led growth internationally.

The company also suspended a partnership through which it sells donuts at McDonald's outlets and said it would reset the terms before launching again.

In an investor note, JPMorgan said the recent drop in Krispy Kreme’s stock is primarily tied to its decision to revise its fresh donut delivery growth strategy.

The investment firm said it had misjudged the operational challenges and inconsistent demand tied to the McDonald’s collaboration.

While Krispy Kreme will likely endure long-term, the current trajectory makes it tough to recommend the stock at this time, JPMorgan said.

On Stocktwits, retail sentiment, however, held in the 'extremely bullish' territory.

Several users said the company will stage a turnaround and the stock will bounce back.

One user said Krispy Kreme will see organizational changes soon, including potential involvement by some activist investors.  

Krispy Kreme stock is down 70% year to date.

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