Posted on 11/22/2004 8:43:00 AM PST by Tumbleweed_Connection
Shares of Krispy Kreme Doughnuts Inc.'s fell sharply Monday as a 79 percent plunge in third quarter earnings and an intensifying accounting investigation overshadowed the pastry maker's statement that the low-carb craze might be easing. The Winston-Salem-based company also withdrew its sales forecast and said it would not provide an outlook for the current quarter and 2005.
Losses for the quarter were $3 million, or 5 cents per share, from a profit of $14.5 million, or 23 cents per share, a year ago. Excluding the one-time charges related to discontinued operations, the company earned $2.4 million, or 4 cents per share, in the latest quarter.
Analysts surveyed by Thomson First Call had expected Krispy Kreme to earns 13 cents per share.
In late morning trading, Krispy Kreme shares were down $1.96, or 17 percent, at $9.54 on the New York Stock Exchange. The shares are off more than 70 percent since the beginning of the year.
"Clearly we are disappointed with our third quarter results," chairman and chief executive officer Scott Livengood said in a statement. "We are focused on addressing the challenges facing the company and regaining our business momentum."
Those challenges include a federal investigation into its accounting practices. The company said earlier this year that the Securities and Exchange Commission was looking into its franchise reacquisitions and its future earnings outlooks.
Krispy Kreme said Monday that it incurred about $3 million in fees during the third quarter from the SEC probe and related matters, and expects more such expenses going forward.
The company also said it has set aside $2 million to deal with potential expenses related to accounting issues involving two franchisees.
On a conference call with analysts, Livengood said the low-carb dieting phenomenon is still a factor in the company's soft sales, but he believes the trend might have peaked. Krispy Kreme had previously blamed the diet for much of its sales difficulties this year.
He declined to answer any questions during the call, citing the pending investigations. Instead, the company said it would post answers to questions submitted by analysts on its Web site.
Total sales for the quarter ended Oct. 31 increased 1.4 percent to $170.1 million from $167.8 million in the third quarter of last year. Company store sales overall were up 9.6 percent to $121.2 million, though sales at company stores open at least one year fell 6.2 percent.
Fifteen new Krispy Kreme stores - 13 factory stores and two satellites - opened during the quarter. Nine stores, comprised of seven stores and two satellites, were closed.
That brought the number of stores systemwide at quarter-end to 429.
The company's net loss for the first nine months was $21.7 million, or 34 cents per share, on sales of $531.9 million, compared with net income of $40.7 million, or 66 cents per share, on sales of $475.6 million in the year-ago period.
Bummer. Their factory here in Sarasota/Bradenton is nice because they have a little store where you can buy doughnuts at really cheap prices. I hope they don't go out of business ;\
A lesson Krispy Kreme should have learned from Italian Oven and Boston Market.
Not to mention $8 a dozen for cold take out at the grocery store.
NOOOOOOOOOOOOOOOOOOOOO!!!!!!
Krispy Kreme is a gift from God and a taste of heaven...they cannot go under!
Bingo. The fad is over.
Did michael moron go on a diet???????
KK's problems are simple, it over-expanded too quickly and relied upon its "FAD" status to continue. Now don't get me wrong, I grew up in NC and KK has been part of my life experience since I was a child, and I missed them when I moved North.
However when I was a child the doughnuts were far larger than the little overpriced ones they sell today. Now there is still nothing quite like that fresh and hot KK doughnut.. but they are smaller than competetors and overpriced.
Once a KK doughnut has cooled its not much different than any other doughnut out there, other than the fact its smaller and costs more.
KK needs to slow its expansion, get back to basics and its core... and be a doughnut company again, instead of a company that is selling franchises primarily. They do that they will be ok.
Maybe they should, like, sell doughnuts instead of sweetened air.
kk bump
long live DUNKIN D's!
I wonder if in the 2006 / 2008 campaigns the Democrats will repeatedly try to link Republican candidates to "Krispy Kreme" like they did Enron. LOL.
No, you were smaller so they looked bigger.
Look at the numbers. They aren't even close to going under.
"Excluding the one-time charges related to discontinued operations, the company earned $2.4 million, or 4 cents per share, in the latest quarter."
So, they actually made $2.4 mil, then you add in the other one-time expenses ($3 mil in SEC fees and a $2 mil set-aside), and they were over $7 mil in the black. Don't worry, we'll still be able to get our sugar and grease fix.
No my friend, the KK doughnuts of the 70s were not the silver dollar pancake doughnuts they sell today... trust me.
Must be a blue state problem.
Come on down to the red states -- Krispy Kreme is always packed and cars swerve into their parking lots whenever the "HOT DOUGHNUTS NOW" sign lights up!
These aren't donuts. The only REAL donuts in this universe can be purchased at Aurora Donuts.
Fad's not over for me...I don't care if they pull every low carb item from the shelves...restricting carbs has had such a positive impact on my life that I'll never go back to the way I ate before.
Do wish KK would come out with a low carb donut, though!
When KK opened a store here in south Denver the lines were two hours long. Today, no lines. The hype is over. The "Air Donut" is done. Better donuts to be had at Lamars.
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