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Krispy Kreme: too much, too fast; rapid-expansion and variable profit quality

Published: July 2013 · Publisher: MarketLine
Krispy Kreme Doughnuts, Inc. (Krispy Kreme) is a retailer and wholesaler of doughnuts, complementary beverages and treats and packaged sweets. The company owns and operates company owned doughnut stores and franchise stores.
Report Type Case Studies
Language English
Format Electronic (PDF)
Pages20
Frequency Updated Annually
Availability Will be emailed within 1 business day
Reference No. 0109-6701
Price € 369,00
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Introduction

Krispy Kreme Doughnuts, Inc. (Krispy Kreme) is a retailer and wholesaler of doughnuts, complementary beverages and treats and packaged sweets. The company owns and operates company owned doughnut stores and franchise stores.

Features and benefits

* “The publisher's Case Studies describe topics such as innovative products, business models, and significant company acquisitions.”
* “Fact-based and presented in an accessible style, they explain the rationale of commercial decisions and illustrate wider market and economic trends.”

Highlights

In the financial year ended January 2005, Krispy Kreme Doughnuts, Inc. (henceforth Krispy Kreme) made a net loss of $157.1m. This was posted in stark contrast to the $49.8m net profit it had posted the year prior. In 2000, when the company went public and shares were trading at an all-time high.
However, in just two years, by early 2005, the company had performed a financial U-turn: not only were shares trading at an all-time low, hovering around $6 per share, but the company was also the subject of an investigation by the SEC

Your key questions answered

* How did Krispy Kreme perform over the years 2000 to 2012?
* Why did Krispy Kreme do so badly and then turnaround?
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OVERVIEW
Catalyst
Summary
KRISPY KREME’S SHORT-TERM POPULARITY FOLLOWING FLOTATION IN 2000
Popularity in the markets
Impetus
Share price peaks
Financial Metrics
VARYING PROFIT QUALITY, LONG-TERM WEAKNESSES, AND OVER-EXPANSION
New store openings
Weakness in strategy
2005-2007 results
Franchisee model
Criminal investigation
TURNAROUND AND RECOVERY, VIA OPERATIONAL CUTS AND ASSET DIVESTMENT
Zolfo Cooper
2011 SAW A RETURN TO PROFITABILITY
Financial success
Enhanced top line and cost controls led to profit
Liquidity and a deleverage made a healthier company
Improvements at operational level translated an improved cash flow position
Performance reflected by share price from Q4 2012
CONCLUSIONS
Corporate hubris
Growing much too fast
APPENDIX
Definitions
Sources
Further Reading
Ask the analyst
About the publisher
Disclaimer
Copyright © FriedlNet. You may share using our tools Please don't cut content from FriedlNet and redistribute by email or post to the web.