Krispy Kreme Kan’t Katch a Break

Jacob Harper  |

Former national guilty pleasure-turned casualty of the U.S. fast-food backlash Krispy Kreme Doughnuts (KKD) issued earnings after the bell on June 2, in which the company lowered guidance and reported disappointing same-store sales.

CEO James Morgan was quick to single out the harsh winter for why revenues were as disappointing as a day-old bear claw. Morgan glazed over internal reasons for the decline, blaming the Southeast’s harsh wintry conditions, saying they “contributed to a 1.5% decline in same store sales at company shops against a very tough 12.2% same store sales gain in the first quarter last year.”

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While the snowstorms that blanketed Krispy Kreme’s Southeastern home region like so many powdered doughnuts certainly affected their bottom line, as it did for many brick-and-mortar institutions throughout various sectors, the lowered yearly guidance was the real deal-breaker for investors. It is also indicative of the possible end of Krispy Kreme as a hot growth investment, one that had gained 425 percent in just five years prior to June 3 market activity.

Krispy Kreme's Stock Not Looking as Tasty

Gone are the days when Krispy Kreme’s products and store openings were hot as a fresh cruller. While the company has transitioned decently as their growth period subsides, and had only shed 1.45 percent of their value prior to the report, their earnings miss still cannot be considered anything but a major setback.

In short, the company got creamed in their earnings. For their first quarter 2014 report, Krispy Kreme reported a net profit of $15.8 million, or $0.23 per share, versus the net profit of $14.1 million, or $0.20 per share, from the same period a year ago. Revenue for the quarter was $121.6 million, as compared to $120.7 million from the previous year. Analysts were expecting a profit of $0.24 per share on revenues of $126.5 million.

The biggest issue for investors was the ratcheting down of guidance for the rest of the year. Krispy Kreme now expects earnings to be in the $48-$51 million range, down from $52-$55 million. The company had previously gotten dunked in their second- and third-quarter 2013 earnings reports.

The lowered expectations filled investors not with jelly, but fear, and a major sell-off ensued. By 1:30 EST shares of Krispy Kreme had fallen 14.47 percent to hit $16.25 a share.

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