Glazed Gains: Krispy Kreme Call Options Deliver

On Feb. 24, our Unusual Activity Service identified significant bullish call buying, with 4,400 27February 3 calls bought for $0.15-$0.20 above the existing open interest of 336 contracts, with DNUT shares trading at $2.93-$2.97. Earnings were expected on February 26th.

Those 27February 3 calls traded as high as $1.10 today with the stock at $4.10, delivering impressive returns of approximately 450.00% from the maximum entry price of $0.20. Meanwhile, DNUT shares gained approximately 39.93% from the lowest entry level of $2.93, demonstrating how options can deliver dramatically amplified returns compared to simply owning the underlying stock.

This performance illustrates the power of options leverage when the directional thesis proves correct, though it’s important to note that this same leverage can work against traders when market moves go in the opposite direction.

Massive Earnings Beat Validates Turnaround Progress

The timing of the February 24th call buying proved remarkably prescient, as just two days later Krispy Kreme delivered one of the most dramatic earnings surprises of the quarter. This morning, the company reported Q4 2025 adjusted earnings per share of $0.09 versus analyst estimates of $0.03—a stunning 200% beat that sent shares surging as much as 17% in early trading.

Revenue of $392.4 million exceeded the consensus estimate of $389 million, while adjusted EBITDA of $55.6 million crushed expectations of $46.7 million—a 19% beat. The company expanded adjusted EBITDA margin by an impressive 280 basis points year-over-year to 14.2%, demonstrating the effectiveness of management’s cost restructuring and turnaround initiatives.

CEO Josh Charlesworth emphasized the inflection point: “During the fourth quarter, we demonstrated meaningful progress on our turnaround, unlocking strong consumer demand for Krispy Kreme’s iconic, fresh doughnuts through our two biggest opportunities: profitable U.S. expansion and capital-light international franchise growth.” The improved profitability came despite a 2.9% revenue decline, reflecting strategic closures of underperforming locations and the exit from the McDonald’s USA partnership.

The margin expansion was driven by multiple factors including productivity initiatives, SG&A savings, removal of costs from the ended McDonald’s partnership, and $4.8 million in business interruption insurance recoveries related to a 2024 cybersecurity incident. The company also announced it achieved positive free cash flow of $27.93 million in Q4, a dramatic turnaround from negative $6.87 million in the prior year quarter.

For fiscal 2026, Krispy Kreme expects systemwide sales to grow 2-4% in constant currency from $1.96 billion in 2025, with plans to open at least 100 shops globally. The company targets capital expenditures of $50-60 million, positive free cash flow for the full year, and improved net leverage—all key milestones for a business that had been struggling with profitability and investor confidence throughout 2025.

The timing of the call buying on February 24th at 3:58 PM—positioned just 38 hours before the transformational earnings announcement—demonstrates the exceptional nature of the unusual options activity that preceded one of Krispy Kreme’s strongest quarterly performances and stock reactions in recent history.

DNUT was last up 29.26% at $3.87.