Krispy Kreme gets crushed as JPMorgan downgrades the embattled donut maker

Krispy Kreme shares are down more than 6% this morning after JPMorgan downgraded the stock to “underweight” (sell) from “neutral,” raising doubts about the company’s turnaround strategy. The bank hasn’t had a price target on the stock since May. Shares have lost over 80% of their value since Krispy Kreme’s 2021 IPO.

JPMorgan pointed to a host of headwinds, including the lingering fallout from Krispy Kreme’s scrapped McDonald’s expansion deal. The company originally planned to stock its donuts in all of the fast-food giant’s US locations by 2026, but the rollout ultimately backfired.

“This disruption led to the company being in survivor mode, including the sale of various store assets around the world and an attempted shift to 3P delivery to reduce costs and operational complexity,” analyst Rahul Krotthapalli wrote.

Another issue, he noted, is that Krispy Kreme’s appeal depends on freshness, which means donuts lose their magic minutes after glazing, making it tough to scale an off-site delivery model. Meanwhile, execution risks loom as the company tries to offload overseas stores, while US sales keep sliding from pricing pressure and competition.

Krispy Kreme shares are now down 63% year to date.