ACCOUNTING

Three terrible words

We hate to be the bearers of bad news—so actually, we won’t be. We’ll let the analysts at Gartner do the dirty work.

“By 2027,” the company said in a news release, “weak demand and rising costs will shrink earnings before interest, taxes, depreciation, and amortization (EBITDA) margins by more than 30% relative to 2022.”

To be even more direct, as it was with clients in a December report, “CFOs will have to grapple with substantially reduced profitability” in 2024, 2025 and 2026.

Yeesh. Glad we’re not the ones telling you this—especially because there’s more. “Most companies will be unable to deliver the profitable outcomes investors have come to expect across much of the last decade,” the consulting firm wrote, “as the convergence of low rates, suppressed wages, and steady economic growth that enabled those results no longer exists.”

Click here for more on potential EBITDA erosion.—GD

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STRATEGY

Tasting success

There's a new Coke (not to be confused with the disastrous New Coke of 1985—we wish Coke Spiced better luck).

Executives at The Coca-Cola Co. said during its Q4 earnings call this week that a shift in its marketing strategy and the use of innovations like artificial intelligence have boosted brand value and, importantly, product sales.

“Across our business, we continue to prioritize agility and focus on improving every aspect of how we operate,” CEO James Quincey told analysts.

The beverage company shifted its marketing focus “from a TV-centric model to a digital-first organization that balances local intimacy, scale, and flexibility” to cater to younger consumers, Quincey said. Coca-Cola hyper-caffeinated its digital mix from less than 30% of its total media spend in 2019 up to 60% today. Before, Coke was spending months to create a TV ad, but now, it can create thousands of “contextually relevant” pieces of digital content, Quincey said of the strategic shift.

For more on Coke’s strategic shift, click here.—AZ

EARNINGS

Dunked donuts

2023 was a mixed bag—er, box—for Krispy Kreme.

On the one hand, the donut maker’s organic revenue climbed 12.2% over 2022, to $1.7 billion. Its adjusted EBITDA rose 11% YoY.

The growth in sales can be credited partly to the fact that the company expanded its “global points of access,” or places where you can buy its donuts, by 19.5% in 2023, to more than 14,000. The company opened stores in seven new countries last year (you can now get Krispy Kreme in Kazakhstan), expanding its global footprint to 39 nations. Seasonal offerings and tie-ins, like the Elf movie donuts released around Christmastime, also boosted sales, and brought the company more than 40 billion media impressions.

But Krispy Kreme also reported a net loss for the year of $36.6 million, quadrupling 2022’s net loss of $8.8 million. Its adjusted diluted earnings per share for 2023 were $0.27, a decline of 2 cents from 2022. CFO Jeremiah Ashukian pointed to high interest rates and “higher than expected depreciation and amortization” as reasons why.

Click here to keep reading.—CV

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