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WIKI ANALYSIS
Krispy Kreme Doughnuts (NYSE: KKD) operates as a branded retailer and wholesaler of doughnuts. It engages in the ownership and franchising of Krispy Kreme doughnut stores, which make and sell approximately 20 varieties of doughnuts. These stores also offer an array of coffees and other beverages. As of January 28, 2007, there were 395 Krispy Kreme stores operated system wide in 40 states in the United States, Australia, Canada, Indonesia, Japan, Kuwait, Mexico, the Philippines, South Korea, and the United Kingdom, of which 113 were owned by the company and 282 were owned by franchisees.
Company Overview
Business and Financial Metrics
Revenue and Earnings
On December 6, 2007, KKD announced 3rd quarter 2008 results. For the quarter ended October 28, 2007, sales declined (11.7)% to $103.4 million from $117.1 million in the third quarter of the prior year. The net loss for the quarter was $(798,000) or $(.01) per diluted share, improved from a loss of $(7.2) million or $(.12)/diluted share the prior year.
There has been a lot of turmoil at this doughnut maker. On January 7, 2008, the CEO was replaced by Chairman James Morgan. On the other hand, the underlying value in the company and the brand has not been ignored either; Kuwaiti contractor Mohamed Abdulmohsin Al Kharafi & Sons on February 5, 2008, increased its stake in the company up to a sizeable 13.8%
Revenue actually increased along with earnings from 2003 to 2004 when revenue climbed to $649 million from $491 million and earnings jumped from $.52/share to $.78/share. However, in 2005 these results diverged with revenue continuing to grow to $708 million but the company turning in a large loss of $(3.22)/share. Since 2005 revenue has slipped sequentially down to $461 million in 2007 and $431 million in the trailing twelve months (TTM). Earnings have shown consistent although decreasing losses with $(2.20)/share reported in 2006, $(.70)/share in 2007 and $(.90)/share in the TTM.
Free cash flow has fortunately been positive recently with $18 million in 2007 and $8 million in the TTM. The balance sheet at $23 million in cash and $54 million in other current assets reported. This total of $77 million in total current assets yields a current ratio of 1.69. The company is reported to have an additional $114.7 million in long-term liabilities.
Sales growth went from $80.9 million in 1999, $220.2 million in 2000, $300.7 million in 2001, $394.4 million in 2002.[1]
Business Segments
Company Stores(71% of 2008 Revenues[2])
Franchises(5% of 2008 Revenues[2])
KK Supply Chain(24% of 2008 Revenues[2])
Key Trends and Forces
Health Fads and Consumer Shift Toward Health Conscious Diets Affect Sales Environment of Krispy Kreme
High Capital Costs Related to Retail Stores Doubling as Mini-manufacturing Centers Hinders Earnings
Growing Debt on Balance Sheets Stifles Growth Possibilities
Competition
References
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