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.

By Jonathan Berr Apr 18, 2013 8:15AM
An employee holds a tray of cupcakes at a Crumbs Bake Shop in Hollywood, Calif. ( Fred Prouser/Newscom/Reuters)Shares of Crumbs Bake Shop (CRMB), a chain of upscale bakeries, plunged more than 12% Wednesday, continuing a decline from last week, after a report in The Wall Street Journal raised questions about whether the public is suffering from "gourmet cupcake burnout."

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.

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111Comments
Apr 18, 2013 12:06PM
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That's what happens when you charge $4.00 per cupcake.
Apr 18, 2013 12:34PM
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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.

Apr 18, 2013 12:03PM
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It can never replace the DONUT, which is cheaper and had a higher profit margin for the stores like Dunkin Donut.   I can get a dozen for less than $10 here in Phoenix and they bake them twice a day, guaranteed fresh.  That and coffee most people are done.
Apr 18, 2013 12:34PM
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Maybe we should investigate why there was a cupcake bubble and how we can prevent that again in the future.
Apr 18, 2013 10:59AM
Apr 18, 2013 12:19PM
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Good riddance!  I will not lament the passing of an overhyped, overpriced fad.
Apr 18, 2013 12:53PM
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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!  

Apr 18, 2013 1:25PM
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Is Starbucks and expensive coffee next?
Apr 18, 2013 12:55PM
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yeah, 4 bucks for a cupcake is insane. people just get tired of this kind of greed.
Apr 18, 2013 12:06PM
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It was only a matter of time-kind of like the "oxygen bars" of a few short years ago. 
Apr 18, 2013 12:53PM
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$4 to $5 a cupcake ? $60 a doz.? If you told someone what flavors you liked, I bet Publix, Winn-Dixie, Kroger, Safeway, or any other supermarket bakery could make these & taste TWICE as good at half the price.
Apr 18, 2013 1:04PM
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How can people not foresee something like this happening? It's only surprising that it didn't happen earlier, with this economy. I can buy a decent cake for $8 that will serve eight people or I can buy Crumbs' cupcakes for $30. $1 per person vs. $3.75 per person isn't that difficult of a decision for me.
Apr 18, 2013 11:23AM
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that's usually what happens when your greedy....First Ive heard of this store
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I don't know what is more useless, a $4 cupcake of a $4 cup of coffee, both really dumb ideas.  But crappy Starbucks still packs in suckers.
Apr 18, 2013 12:19PM
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As if Americans are fat and spoiled enough. The last thing we need are cupcake stores.
Apr 18, 2013 1:48PM
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Gee, you don't think that it has anything to do with the fact that 6 of their cupcakes cost $27 do you?
Apr 18, 2013 2:16PM
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Krispy Kreme Hot & Glazed Doughnuts!   MMMMMMMM, the best!  $5.75 a dozen!
Apr 18, 2013 2:01PM
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Greedy people trying to hitch their wagon to the "Cupcake War's Show "  Here's a hint , Make your own cupcakes, it's not difficult at all. Think of the points you'll  earn from your family.
Apr 18, 2013 2:14PM
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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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