As has been noted before with regard to doughnut seller Krispy Kreme (KKD), when you've got a stock that's run up six times as much as the market since the start of the year, punishment can be severe when expectations aren't met.
On Tuesday, the stock was down 19.4% to $19.80, on 10 times the normal volume, following an earnings projection that irked investors. Fiscal year 2015's profits per share will grow as much as 21% from the current year's likely number, but analysts were looking for a bit more from the Winston-Salem, N.C., company. Whereas Krispy Kreme is projecting 71 cents to 76 cents, the consensus forecast called for 77 cents. (Krispy Kreme's current fiscal year, in which Wall Street is estimating 63 cents, will end in January 2014.)
It's understandable that traders and shareholders would use the shortfall as a good excuse to unload a stock that was up more than 160% coming into the session, but they were especially ticked after the news, sending it to the fourth-largest single-day selloff in its roller-coaster history, and the worst in two-and-a-half years.
And because of the dive, Krispy Kreme no longer has nearly the bragging rights it had ahead of trading. From the end of last year through Monday's close, Krispy Kreme was the best stock by far of 21 fast-food, fast-casual and casual dining restaurant stocks we surveyed. On the whole, the group has been very good this year, with most of the names in the chart outpacing the S&P 500 and the Dow Jones Industrial Average, but Krispy Kreme was well in front of its peers.
The chart below shows Krispy Kreme leading the way for the restaurants, through Dec. 2.
Now, it's been relegated to second place, behind Red Robin Gourmet Burgers (RRGB), thanks to a nearly 50-point, post-earnings cut in its year-to-date advance.
Still, there's nothing at all wrong with a climb of 112% for the year, and at the moment, that's where Krispy Kreme stands. If you're long, however, there's of course something extremely wrong with watching an entire fifth of your market cap be erased in one session.
A small consolation might be that at least it's not alone -- of all the stocks charted here, only Applebee's and IHOP owner DineEquity (DIN) managed to eke out a gain for the day.
- Consumer Discretionary
- Krispy Kreme