Crumbs' stock crumbles as cupcake fad fades
It looks like Americans are suffering from gourmet bakery burnout, with the once-hot publicly traded shop's shares now going stale.
Crumbs, which is based in New York and has 67 locations in 10 states, recently reported a fourth-quarter net loss $5.36 million, or 49 cents a share, compared with a loss of $1.76 million, or 32 cents per share, a year earlier. Sales fell 2% to $10.8 million as Superstorm Sandy took a bite out of business.
All that led Crumbs to slash its yearly sales forecast to $57 million from $73 million. It now expects a 2013 loss, excluding some costs, of $3.9 million, versus an earlier projection of a $3.2 million profit. That has pushed the stock down to $1.49, far below its 52-week high of $3.57.
Crumbs, which couldn't be reached for comment, also had to raise $10 million in financing, which spooked investors further. CEO Julian Geiger disputed the idea that cupcake demand is crumbling. He told the paper, "The decreases in business are in the metro markets where the stores have existed for quite a while."
However, others in the cupcake industry are reporting that business is dropping off. It's easy to see why: As the Journal notes, the cupcake business has a "relatively low barrier to entry" and has become increasingly competitive.
This represents a sea change from a few years ago when cupcakes were part of the cultural zeitgeist. The "Lazy Sunday" video from "Saturday Night Live" extolled the virtues of cupcakes sold by Magnolia Bakery, which were also favorites of the characters on "Sex and the City." Several cable networks even showed cupcake-themed reality shows.
Whether the cupcake's decline will trigger increased demand for pies remains to be seen.
Jonathan Berr is a believer in birthday cakes. He doesn't own shares of the listed stocks. Follow him on Twitter at @jdberr.
I live in a town of about 100,000 and we have FIVE gourmet cupcake stores (sorry, "cupcake boutiques") and I don't care for any of them. I know most people like the frosting, but I don't care for a tiny cupcake with a mile high of pure sugar on top and being charged $5.00 for it! I'm surprised it has lasted this long.
I'll admit that some of the cupcakes I have seen from "boutiques" have been innovative and unique, but I definitely agree with mostly everyone else. They're way too expensive, the TV shows about them are insipid and ridiculous, and the fad just needs to be over already. Investors - get out while you can.
Long live the donut!
not to mention after digging through a mile of tastless sugary icing, the cake itself is crappy and dry. So not worth it.
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