Krispy Kreme stumbles again

After reviving from its famous Wall Street flame-out, the doughnut company's second-quarter earnings leave investors cold.

By Bruce Kennedy Sep 3, 2013 7:43AM

Krispy Kreme (KKD) may be known for its "hot now" neon doughnut signs, but Wall Street's reaction to the company's latest quarterly earnings report was decidedly cool.

The restaurant chain's profit fell to $4.7 million, or 7 cents a share, for the second quarter. That's down from $4.9 million in the same period a year earlier. And while adjusted per-share earnings rose 17% to 14 cents, that was two cents short of analysts' expectations.

And in spite of news that second-quarter revenue and same-store sales (sales at locations open for at least a year) both rose 10%, Krispy Kreme share prices fell off the counter -- dropping over 12% after the report hit and closing 15% lower.

It was rough news for a company that had previously met or beaten Wall Street forecasts in six of the the last seven quarters. But then again, Krispy Kreme's story has been something of a saga since its IPO in 2000.

Doughnuts are boxed at the Krispy Kreme store on April 15, 2004 in New York City (© Chris Hondros/Getty Images)It was around that time that the company's light, fluffy doughnuts, long a staple in the Southeast U.S., became a national sensation. Krispy Kreme stock soared in its first two years, but that sugar high soon gave way to a bitter taste in investor's mouths.

Another trend, the low-carb diet, took its toll on doughnuts and other sweets. The company also came under fire for an accounting scandal and liquidity issues. Same-store sales dropped, as did overall revenue. Krispy Kreme went through four CEOs in less than three years, and by early 2005 its stock had fallen nearly 75% from record highs in 2003.

But there was a sugar coating to Krispy Kreme's fall. An aggressive restructuring program closed unprofitable stores and made existing ones smaller, which in turn boosted cash flow and helped cut debt.

By 2010, Krispy Kreme was in full turnaround mode, posting profits again, while expanding operations both at home and abroad.

The company has also jumped back in the race for consumer market share with coffee shop rivals Starbucks (SBUX) and Dunkin' Brands (DKDN).

So, despite a weaker than expected outlook for the rest of the year, company president and CEO James Morgan says the smaller and more efficient Krispy Kreme is confident in its future -- and even plans to open four to five small factories later this year.

That could be sweet news for investors who believe that the "hot now" sign might not only apply to its doughnuts but to its stock as well.

Sep 3, 2013 9:11AM
First of all, where do you live that they're $24 a dozen?  In NC, they're $7.80 p/dz glazed and $8.95 p/dz assorted (that includes tax)!!!!  Very reasonable in my opinion.  As for taste, that's a matter of opinion, however I love them!  As for "healthy", it's a doughnut shop.  You want healthy, go somewhere besides a doughnut shop.  I workout every day, and am very health conscience, but, even I enjoy an occasional splurge.  I just don't eat a whole dozen at once. :)  
Sep 3, 2013 8:41AM
I hate the sign because my car automatically turns in. 
Sep 3, 2013 9:11AM
Thank god they are no longer in my area because I really do not care for donuts at all but these are like crack...can not stop at just one!
Sep 3, 2013 9:07AM
With all the police cut backs, this has had a negative influence on the doughnut industry.....hire more cops!
Sep 3, 2013 8:45AM
One of my favorites in Myrtle Beach.  Walk in and am offered a hot glazed donut while I place my order. Mmmmmm. 
Sep 3, 2013 9:19AM
Where the heck are you folks shopping at?  Krispy Kreme in South Georgia is like 7 bucks a dozen!!!
Sep 3, 2013 8:50AM

At my local Krispy Kreme, they stopped giving away the free HOT Doughnut when you are waiting in line, and the "HOT NOW" sign is never on any more.


I love Krispy Kreme, but a good indication of the downward spiral of any company is when they start getting stingy with their product.

Sep 3, 2013 9:52AM
BASICALLY this report is telling us that our economy is NOT so hot.  We need all those NAFTA and Chinese factories to RETURN from whence they came.
Sep 3, 2013 9:38AM
I love Krispy Kreme...thank God there aren't any near my house. Truly irresistible in my book.
Sep 3, 2013 10:42AM
How many of you KK lovers have ever held a hot glazed KK donut and when you pick it up your thumb and index fingers magically touch because of the fluffiness and warmth like warm melted butter slides across your tongue .. HOLY COW, just thinking about it makes me crazy !!! lolol
Sep 3, 2013 9:08AM
Yet if they began making Bacon donuts they'd be in the black again immediately.
Sep 3, 2013 8:59AM
I miss their store here in Altoona pa walmart plaza.i was vacationing here and had a yummy coffee and a raspberry crème doughnut.i was hooked.when I moved here it was closed!! our loss.sheetz's station doesn't even come close !!!
Sep 3, 2013 9:38AM
I've said for some time, given the opportunity, that I'll go for the glorified junk on occasion and avoid the dumb carb aisles at the supermarket. The fresh baked items at your local bakery is the stuff you'll usually have for family occasions, after services at church or synagogue, banquet items. That's what most of those cookes and faux pastries are based on and except maybe for Pepperidge Farm, they're not even that good. You know that when you have the sweet stuff on the above occasions. I've cut out corn chips in favor of carrot sticks with hummous and that helped bring down my weight. Cutting out all that stuff, especially in the evening, having Krispy Kreme at the office at least once a week and fresh corn chips at the Mexican restaurant occasionally,  doesn't hurt.
Sep 3, 2013 9:03AM

Giving away free samples is no longer profitable.

The welfare public,

YES the ones that get FOOZE STAMPS are in line at Krispy Kreme and all other establishments giving out free samples, and they soon learn to demand a doughnut for all theys childrens and then ask where the bathroom is after purchasing a coffee to go.

Sep 3, 2013 9:10AM
Neither are Tastycakes - The French Apple pie use to have the top cover with icing.  No more.  It the same with the chocolate éclair pie.  Very disappointing.  They are cutting corners and losing a lot of customers. 
Sep 3, 2013 8:54AM
I love Krispy Kreme donuts, but my waist line doesn't, and they are outrageously expensive. If they were cheaper I would eat more and weigh about 40 pounds more than I do now.
Sep 3, 2013 9:59AM
Actually, I live in the Boston area and Krispy Kreme opened a location a few years back. They were HUGELY popular for a very brief time. The problem was they had to compete with Dunkin' Donuts (In which there is one on just about every street corner!) and Dunks' coffee is better. They also serve sandwiches and wraps etc. It's just not enough to have Hot donuts as your gimmick anymore. Customers want more variety and up in New England, we NEED our quality COFFEE! LOL.  I liked them BTW, but as I get older and don't want to get fatter than I already am, I am beginning to forgo donuts completely...even if they are hot and delicious...mmmmmm...donuttttssss!
Sep 3, 2013 9:24AM

I'm off donuts--haven't had one now going on seven years.

KKD's to me are only good when they are picked from the line.

I had the cold ones on the store shelves.  Bakery ones are the

only good ones.  Also not free anymore when the sign is on.


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