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Krispy Kreme Doughnuts, Inc. Message Board

  • di_vur_se_fi di_vur_se_fi Feb 13, 2003 11:35 PM Flag

    Info in last year's prelim

    As is common knowledge on this board, KKD "expects" to provide preliminary results tomorrow (I tried to listen to the CFO's presentation this morning but, unfortunately, the sound was poor; the few snippets that I could hear, though, gave no indication that prelim results would be announced tomorrow).

    As a means of comparing last year's prelim info to this years, here is what was included last year:

    Q4/Full Year Company Revenue
    Q4/Full Year Systemwide Sales
    Q4/Full Year Company Sales (excludes KKM&D and franchise revenue)

    Full Year New Store 1st week sales
    Full Year New Store openings vs. prior guidance
    Total store count
    FY03 store opening guidance
    FY03 doughnut and coffee store opening guidance
    Q4 systemwide sss
    Q4 company sss

    Full year net income guidance
    FY03 net income guidance
    cash & investments balance
    debt level
    line of credit open

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    • > Although only 1.2 million shares are being issued, MMX has failed to make any money and same store sales/margins have been declining as reported throught Q3. <
      Don't you worry it. KKD's best accountant will immediately make it as positive earnings and 12% same store increase.
      I thought colorado stores couldn't have a positive same store increase since the traffic is less than last year. But the accountants made it, they are worth more than their options!

    • Does anyone have any insight as to the future impact of the MMX acquisition for KKD?

      Although only 1.2 million shares are being issued, MMX has failed to make any money and same store sales/margins have been declining as reported throught Q3.

      I believe that the MMX reporting period for Q4 ended Jan. 31, 03. MMX management had (at the time of their last reporting)indicated that they would attempt to report results on a more timely basis.

      Q4 should be an extremely important and revealing period for helping to better understand the potential for MMX going forward. Within the "Bread" business there is likely to be significant seasonality. The Q4 quarter incorporates the holiday sales volume with both Thanksgiving and Christmas sales included. One would think that MMX's gift box sales during this period would be a major incremental sales contributor both at retail and on the internet.

      The new MMX "Breadit" cards also could have also potentially generated incremental sales in the short-term. I'm not clear as to how these "prepaid sales" will be handled given that some of the actual redemptions (loaves out the door) could well fall outside of the quarter in which the cards were sold and/or the amount of prepaid credits increased. Of course, there is likely to be some slippage in terms of lost cards as well as non-redeemed credits.

      It would also be interesting to learn more about the status of the franchising effort. Any new agreements signed? When will the first Washington DC store open? Or, has the MMX franchising effort been curtailed pending the KKD acqusition?

      Even assuming a June closing for the acquisition by KKD, aren't the KKD/MMX shareholders entitled to a TIMELY reporting as to the status of BOTH company's results?

      With a understanding of the relative strength and/or weakness of MMX going forward, we can all be in a better position to accept/reject KKD's previously reported indication that the negative impact of the acqusition will be only ($ .03)/ KKD share.

      Rather than being accreditive in the longer term, MMX could well have a negative impact on KKD's profit prospects.

    • The stock has been dead as nails of late except for today when "wonderful" news was released. You think that just may be someone in the know would have known about the "wonderful" results that KKD is releasing before hand. Yet the stock showed no such pre-release knowledge. Now they make the "wonderful" news public and the stock gains 10% in a day. A real surprise! My take. Who ever was getting out didn't get all the way out. So release some "wonderful" news, and then get out. I thought it was going to come in the form of an analyst upgrade or manager tout on CNBC. But same difference. You got a 10% premium on selling KKD after 10am on friday. Now the public is real gullable, so this momentum should carry this to 34 or 35. That would be a good entry point to short.

      This company's stock price is probably discounting that every one in America will take one meal of hot glazed per day in a year.

      I think when support in the high 20's was broken, it was all to obvious a short. Glad I didn't enter at that time. I'll enter in the mid 30's.

      When it finally falls.....Can you say "Boston Chicken?"

    • di vur se fi., I read your analysis and all I got was a headache. I beleive it is called paralysis by analysis.

    • Basically, all I was trying to say was that you can easily calculate Q4 FY03 sss figures based on available information:

      (Q4 FY02 sss figure) * 1.143 = (Q4 FY03 sss figure)

      ---

      But you can't! We don't know Q4 FY02 base anymore than we know Q4 FY03 sales attributable to sss (even when they release them). We don't know the size of the base => we don't know the % of company sales included in the sss figure. Let's say retail sales are actually falling at a 10% rate, yoy. All KKD has to do to show 14.3% store comps is start selling 24.3% of year ago revenue offsite. For example, let's say a particular store in Q4 FY02 had the following characteristics:

      $1 million retail sales
      $0 offsite

      In Q4 FY03 the same store had the following characteristics:

      $0.9 million retail
      $243,000 offsite

      0.9 + 0.243 = 1.143 => sss of 14.3%

      Why does it matter? Well, offsite sales are unprofitable, IMO, and retail sales are profitable. It's that simple.

      Further evidence is found in the deteriorating operating cashflow (adjusted for tax benefits due to option exercise) and the breakdown of the increase yoy between offsite and retail. In Q3, for example, company store sales increased by $12.4 million (from 68.6 to 79.0) as we have discussed before. According to the 10-q, $2.9 million of the increase was retail and $7.5 million was offsite. At the same time they went from 75 stores to 90 stores. The 15 new stores only increased retail by $2.9 million? No, they probably increased retail by a lot more than that. Let's say they averaged $500,000 (very conservative), so 15 * 0.5 = $7.5 million in incremental retail sales by the 15 new stores. In other words, the rest of KKD's retail world actually had a DECLINE of $4.6 million during the period (because we know that total retail sales only went up $2.9 million yoy).

      Paradoxically, as I have hopefully shown, the sss figure is somewhat of a contraindication to the health of the retail business. KKD knows that to make overall revenue numbers look decent when retail sales are poor, they need to jack up offsite sales. This typically happens at stores that have been open at least 18 months, hence the relatively high sss.

      ---

      To sum it up, KKD uses the high sss (created by jacking up low margin offsite sales) and the quirky calculation method (not included until 19th month) to create the following investor illusion:

      1) Opening sales are massive
      2) sss are high

      =>

      3) Stores must be doing even more business than they did at the open!
      4) KKD is the next SBUX, MCD, whatever...

    • << Note: Just to reconfirm, you realize that the $75.4 million include NEWLY opened stores revenue (opened in 6 months prior to end of FY02 Q4) which IS NOT PART OF sss, don't you? In other words, you can't multiply 1.143 * 75.4 to get the change in sales for the stores opened at the end of FY02. >>

      No, actually I assumed you were providing the sss figures for Q4 FY02, but I now see that my assumption was not correct; I just failed to pay close attention to your correct label. Basically, all I was trying to say was that you can easily calculate Q4 FY03 sss figures based on available information:

      (Q4 FY02 sss figure) * 1.143 = (Q4 FY03 sss figure)

      And yes, this is obvious, but IMO it does constitute sales figures included in the press release. That is the extent of my point. I realize this does NOT equate to overall sales figures, and that sss figures can be misleading (which is an adjunct to my point). I consider the other points you raised to be separate but valid issues.

    • What I CAN calculate with only this information is the projected sss figure for company stores in Q4:

      $75.4 * 1.143 = $86.2 million

      ---

      Okay, so you estimate $86.2 million for stores #1 thru #75. Now what about the effect of the other 20 or so company stores not included in that base (store count rose from 75 to 96 or 97). Did they add any incremental sales? Let's say they add $800,000 a piece. 21 * 0.8 = $16.8 million.

      $16.8 + 86.2 = $103 million.

      If that were the case, company store sales would have risen by 36.6% yoy. If that were the case don't you think KKD would have told us about it? The corresponding real number was 15.2% in Q3 yoy. My guess is that the Q4 number will be closer to that than 36.6%.

      So, at 15% yoy, I project Q4 Company store sales to be

      75.4 * 1.15 = 86.7

      which is a far cry from $103 million

      Make sure to bookmark this post.


      Note: Just to reconfirm, you realize that the $75.4 million include NEWLY opened stores revenue (opened in 6 months prior to end of FY02 Q4) which IS NOT PART OF sss, don't you? In other words, you can't multiply 1.143 * 75.4 to get the change in sales for the stores opened at the end of FY02.

    • << We really cannot determine Krispy Kreme's Q4 revenue yet. >>

      Agreed.

    • di_vur_se_fi, you wrote:

      << The bottom line, however, won't change. KKD's sss numbers overstate how quickly sales are actually changing given the growth in the store count. >>

      No argument. If sss numbers were being pushed off as total sales numbers, that would constitute fraud. But since they are properly represented, they are what they are, and KKD is smart to use them in that way, knowing that they accentuate the positive. (The only quibble I have is that the 19-month criteria is not standard, and is buried in the SEC docs.)

      ---

      << KKD had company store revenue of $75.4 million in Q4 FY02. Company Store count has risen from 75 to 96 or 97. SSS for company stores is 14.3%. What do you expect company store revenue to be for Q4? >>

      I obviously can't calculate total company store revenue based on only this data. I could probably make a pretty good guess if I took the time to look up change in store count between Q1 FY01 and Q2 FY02 and factored in any old store closings, since that data would constitute the delta between 19-month-old stores as used in the sss calculation. (By itself, the store count delta between Q3 and Q4 FY 03 which you included is meaningless in the calculation, as you pointed out yourself.)

      What I CAN calculate with only this information is the projected sss figure for company stores in Q4:

      $75.4 * 1.143 = $86.2 million

      That was my only point. The value of this information as it relates to KKD's prospects is debatable, and I would tend to agree with your view, which is that it probably carries little relative weight fundamentally. But psychologically, it carries a great deal of weight, as again you pointed out yourself.

    • "Additionally, as I noted above, he is now quite secure financially, and
      is more interested in his legacy, i.e. new headquarters dominating downtown
      Winston-Salem in partnership with NC School of the Arts."

      The BS fows thicker and thicker! I bet you don't even know where W/S is.

      The master of BS plods on!

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