Krispy Kreme Doughnuts (KKD)

NetscribeConsGds (96.11) Submitted: 1/29/07 7:55 AM : Start Price: $12.89 KKD Score: -52.48

Krispy Kreme is a retailer and wholesaler of high-quality doughnuts. The principal business of the company is owning and franchising Krispy Kreme doughnut stores, with operations spread across globally through its 381 stores.

During the fiscal 2006 the company and its franchisees has experienced declines in average weekly sales per factory store. However, the company responded to this trend by closing relatively poorer performing stores and consolidating production of doughnuts for off-premises distribution into a smaller number of factory stores. The result is reflected in the form of increase in company and system wide average weekly sales per factory store by 11% and 6% respectively, for the first nine months of fiscal 2007. While Company average sales per store increased 9.4% for the same period.   

The company’s bottom line has been in red for the past nine quarters. However it has been able to lower its loss for Q3’07 as costs for closing poorly performing stores fell. Moreover, Krispy’s plan to expand its international operation by developing about 200 stores overseas over the next five years, which includes markets like Asia, the Middle East and Western Europe, should be able to boost its top-line. Further Krispy Kreme is working with local companies in those overseas markets to best meet foreign tastes, which could reduce its financial risks.

Krispy Kreme initiatives to close down its poor performing stores coupled with its increased attention towards international market should be able to rise its sale and thereby make the Krispy Kreme Doughnuts more sweeter for the investors.

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