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Low Carb Diets Leave Krispy Kreme Weak
NEW YORK (Reuters) — Krispy Kreme Doughnuts reported Tuesday its first quarterly net loss since it went public four years ago and cut the number of planned new stores as doughnut sales suffer amid the low-carb diet craze.
The company, which earlier this month slashed its profit forecast for the year, triggering a huge sell-off in its stock, said it now will open 100 new stores this year, about 17% fewer than planned previously.
For the fiscal first quarter ended May 2, the doughnut chain, based in Winston-Salem, N.C., posted a net loss of $24.4 million, or 38 cents a share, after recording charges for shutting down its Montana Mills Bread chain and restructuring other operations.
The loss, its first since going public in April 2000, reversed a profit of $13.1 million, or 22 cents a share, a year earlier.
Excluding those costs, Krispy Kreme reported a profit from continuing operations of $14.3 million, or 23 cents a share, up slightly from the year before and generally in line with Wall Street's lowered expectations, according to Reuters Estimates.
On May 7 Krispy Kreme cuts its earnings forecast and set plans to overhaul operations, blaming low carb diets for its difficulties.
As of March, the company had planned to open 120 stores this year, a figure some analysts had criticized as too aggressive in the current environment for bread products. Now it will open just 80 factory stores and 20 satellite locations.
The total number of stores at the end of the first quarter was 401.
Looking forward, Krispy Kreme estimated fiscal 2005 earnings from continuing operations of between $1.04 and $1.06 a share. Analysts' currently expect $1.00 on average, according to Reuters Estimates.
The forecast is consistent with the profit warning earlier this month, when it shaved 10% off its previous range of $1.16 to $1.18 a share.
Krispy Kreme said it now estimates full-year systemwide sales will increase 20% to 25%, and that systemwide comparable-store sales will rise by a low- to mid-single digit percentage.
Shares of Krispy Kreme closed at $19.85 on Monday on the New York Stock Exchange, compared to a 52-week high of $49.74 reached last August.
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