What Happened?
Shares of doughnut chain Krispy Kreme (NASDAQ: DNUT) jumped 3.4% in the morning session after the company launched a new limited-edition doughnut collection in partnership with Warner Bros. based on the popular Harry Potter series. The new collection, launched in partnership with Warner Bros. Discovery Global Consumer Products, features doughnuts inspired by the four Hogwarts houses: Gryffindor, Slytherin, Hufflepuff, and Ravenclaw. The collaboration with the globally recognized Harry Potter brand is a significant marketing move expected to attract fans and drive sales. To celebrate the launch, which began on August 18, Krispy Kreme is holding in-store events with freebies for customers who arrive in costume. This limited-time offering will also be available through retail partners, including 7-Eleven, expanding its market reach. The excitement surrounding this major brand partnership is likely fueling positive investor sentiment.
After the initial pop the shares cooled down to $3.61, up 2% from previous close.
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What Is The Market Telling Us
Krispy Kreme’s shares are very volatile and have had 29 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 7 days ago when the stock gained 5.9% on the news that investors cheered a government report showing that inflation remained steady in July.
The steady inflation figures have fueled expectations that the Federal Reserve may soon consider an interest rate cut to stimulate the economy, a move that would likely benefit consumer discretionary spending, including dining out. The July Consumer Price Index (CPI) rose 2.7% from a year earlier, meeting the previous month's pace and coming in slightly below economists' expectations of a 2.8% increase. On a monthly basis, the CPI rose 0.2%, a slowdown from the 0.3% increase seen in June. While the cost of dining out continued to climb, rising 0.3% in July, this was offset by a 0.1% dip in grocery prices, contributing to the overall stable inflation picture. The market's positive reaction sent major stock indexes, including the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite, soaring. This optimism spilled over into the restaurant sector, which has been grappling with a challenging macroeconomic environment marked by high costs and concerns over consumer traffic.
Krispy Kreme is down 63% since the beginning of the year, and at $3.61 per share, it is trading 71% below its 52-week high of $12.42 from November 2024. Investors who bought $1,000 worth of Krispy Kreme’s shares at the IPO in June 2021 would now be looking at an investment worth $171.43.
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