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Krispy Kreme Doughnuts, Inc. Message Board

  • di_vur_se_fi di_vur_se_fi Feb 18, 2003 12:43 PM Flag

    Favorite metrics

    KKD's favorite metric is Same Store Sales:

    Company Same Store Sales Year over Year:
    Q3 01: 23.6%
    Q3 02: 11.1%
    Q3 03: 13.0%

    One of my favorite metrics is based on the following:

    TOTAL Year over Year Company store RETAIL sales change:
    Q3 01: $4.3 million
    Q3 02: $7.5 million
    Q3 03: $2.9 million

    Company stores (end of period):
    Q3 00: 59
    Q3 01: 60
    Q3 02: 75
    Q3 03: 90

    Year over year increase in company RETAIL sales per new store:

    Q3 01: $4.3 million / (60 - 59) = $4.3 million
    Q3 02: $7.5 million / (75 - 60) = $0.5 million
    Q3 03: $2.9 million / (90 - 75) = $0.2 million

    While I'm not sure this is my absolute favorite metric (it could be Cashflow from Ops or Days Outstanding Accounts Receivable or Equity Loss from Joint Ventures or Allowance for Doubtful Accounts or Accounts Receivable from Affiliates, etc...) it's certainly up there.

    KKD's company store retail growth is PALTRY, despite large increases in new stores.

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    • di_vur_se_fi, you wrote:

      << ...to imply that my strategy is fatally flawed because my conclusions aren't warranted is wrong. In a probabilistic sense, IMO, my conclusions aren't wrong. In other words, if I were to witness the chain of events apparent in KKD in 10 different companies, yet those conclusions were only warranted in 2 or 3, I would make large profits in those 2 or 3 instances and conceivably break-even on the other 7 or 8. >>

      Explained this way, your strategy makes logical sense to me. I think perhaps we just have semantic differences in the way we express the probabilistic arguments. When you said that you were holding out for the "golden sombrero" because you were convinced that KKD is running a stock price and not a business, that implied to me that you were not being objective about the evidence, not only that which we have seen but also that which we may see in the future. In other words, it implied that you had embarked on your course, and would not consider deviating no matter what new evidence came to light. That would be a strategy I would consider fatally flawed.

      But when you talk rationally about probabilities, large trial sizes, and the realization that you could be wrong a large percentage of the time and still make money, you are speaking a language that I understand. In my world, I would rephrase what you said more along the following lines:

      Your conclusions, based on your models and assumptions, lead you to believe that there is a 20-30% probability that KKD (and your other shorted stocks) will go to zero, but you consider the risk/reward ratio to be favorable based on the limited upside and large potential downside.

      If this is roughly equivalent to your strategy, then I would consider it sound, assuming that your track record supports your contention that you tend to be correct 20-30% of the time, and that the rest of the time the gains and losses balance to a net approximating zero.

      << Regarding influencing others, that is not my intent. >>

      Understood, and I didn't mean to imply that it was your intent. My comments in that regard were directed more toward those who might be inclined to be influenced where no influence was intended.

      << Lastly, in case it isn't obvious, readers should be aware that my writings are influenced by my biases, but that I am not being dishonest. >>

      Understood and agreed.

    • di_vur_se_fi > .... historical record .... This board creates a convenient, free way to do that.
      ==
      Interesting. But it doesn't work.
      Yahoo msg search function is to primitive and buggy. It frequently fails to find even the recent (last few weeks, days) posts by a given author.

      You can keep the id's of your posts and present them, but there is no good way to search and verify if it is complete, ie. did you wrote posts not disclosed by your list.

      I'm not questioning your personal integrity, just pointing out that flows in yahoo search function make it a poor documentation tool.

    • you wrote:

      So if the wholesale business is not profitable, why would they be engaging in it at this point in Daly City when it has no positive effect on SSS and is allegedly decremental to earnings?

      ---

      I agree that it has no positive effect on SSS (though, you are assuming that the sales are being credited to Daly City, see previous post pointing out REDUCTION in number of stores selling OFFSITE).

      Regarding earnings, I agree that it is probably not decremental to GAAP earnings, though I do think it is decremental to economic earnings (see cash flows from operations). It is possible, however, that KKD is so operationally leveraged (high fixed costs, low marginal costs) that the OFFSITE business, by absorbing excess capacity, reduces the average cost of a doughnut sufficiently to make the OVERALL operations more profitable than if it were just a RETAIL outlet.

      The biggest benefit to engaging in offsite sales, imo, is that KKD gets to show revenue increases. Without the increase in OFFSITE sales and the concolidation of Glazed Investments, KKD would have shown a DECREASE in Company store sales during Q3, i.e. the RETAIL business is struggling.

    • (I guess this answers the question about wholesale not being done in stores less than 19 months old, since Daly City was opened in November 2001 according to your research.)

      ---

      Maybe I misspoke. What I should have said was that I think KKD ramps up offsite sales to maximize sss. They can't just turn on the spigot at 18 months operationally (they might be able do it in a spreadsheet, but that's a different issue). Months 7-18 form the base for the first sss reports. If the store ramps up from month 7 to month 18, then the sales at month 19 (the first one in the base). Your store, not in sss, is obviously doing offsite sales.

      Here's a little more data to chew on:

      Total stores beginning FY00: 131
      Openings: 21
      Closings: 8
      Total stores begining FY01: 144
      Openings: 36
      Closings: 6
      Total stores beginning FY02: 174
      Openings: 48
      Closings: 4
      Total stores beginning FY03: 218
      Openings: 63
      Closings: ?
      Total stores: over 270

      From the April 3, 2000 S-1/A:

      As of January 30, 2000, approximately 100 of our stores sold to major grocery
      store chains, including Kroger (which accounted for 10.2% of our total revenues
      in fiscal 2000), Food Lion, Giant Food and Acme Markets, and to local and
      national convenience stores, as well as to select co-branding customers.


      From the FY01 10-k:

      As of January 28, 2001 approximately 123 of our stores sold to major
      grocery store chains, including Kroger (which accounted for 10.2% of our total
      revenues in fiscal 2000 and 9.4% in fiscal 2001), Food Lion, Giant Food and Acme
      Markets, and to local and national convenience stores, as well as to select
      co-branding customers.

      From the FY02 10-k:

      As of February 3, 2002 approximately 119 of our stores sold to major grocery store chains, including Kroger (which accounted for 9.4% of our total revenues in fiscal 2001 and 7.9% in fiscal 2002), Food Lion, Giant Food and Acme Markets, and to local and national convenience stores, as well as to select co-branding customers.

      ---

      Observations:
      1) given that 6 stores opened in Q1 FY02 (and have fully entered sss, 63 + 48 - 6 = 105 have not, i.e. nearly 40% of stores are not in sss
      2) 100 of 144 stores sold offsite at the beginning of FY01
      3) During FY01, KKD opened 30 stores (net) and began selling OFFSITE at 23 stores (net), i.e. 123 of 174 stores were selling offsite.
      4) During FY02, KKD opened 44 stores (net) but REDUCED stores selling offsite by 4, i.e. 119 of 218 stores were selling offsite.

      What do you make of KKD's behavior in FY02 when they actually reduced the number of stores selling OFFSITE, but recorded huge increases in SSS?

      I wouldn't even care about this issue, except for one GLARING fact: the implied growth rate, compounded by store growth and sss, is far less than the actual growth rate. Someone KKD is generating huge sss without a corresponding increase in revenue. There must be a explanation; none of the explanations that I have speculated are beneficial to KKD; maybe there are others.

    • "Regarding influencing others, that is not my intent. My intent is to build a historical
      record of my real-time observations and conclusions to later compare to what actually
      transpires. While I could certainly do this on my own (create a private diary), no one
      would believe me after the fact if I tried to show future clients or employers the
      analysis. This board creates a convenient, free way to do that."

      What a crock! Your "observations" (a.k.a. fantasies, scenarios, fairy tails) are never substantiated or never can be substantiated! How can you "later compare to what actually transpires"????

      For your entire history on this board you have presented valuable data and information, but then gone the next step to do nothing but CONDEMN KKD! That is your ultimate sole intent!

      In every case!

      You purposely create conclusions that KKD is crooked, criminal, misleading, deceiving, etc., then come up with the unsubstantiated assumptions to support the conclusions. You have done them in an absolute sense, with intent of trying to convince your readers that they, too, should believe the fairy tale.

      Look at you recent post listing KKD "failures," including bread. Tell me that you were not trying to convince others that these are "failures."

      Your "clarification" here just doesn't hold water, in the same manner that your unsubstantiated assumptions and conclusions don't.


      Say, why don't you update us on that BB & T/KKD conspiracy you tried to get everyone to swallow last year?

    • It's time to pour out one's heart, I see, in order to "try" to qualify past sins.

      As long as you keep using IMO or similar language, as you now have begun to do to take the absolute out of your posts, there will be objectivity, or something approaching it, regardless of how ridiculous and unsubstantiated your assumptions and conclusions are.

    • YOU are the one evading here, Mr. Slogan. Cite the posts to back up your claims and I will cite the ones that back up mine.

      You create new explanations for your previous everytime you post here in a lame attempt to backpedal! However, you simply are tripping all over yourself trying defend your "honor."

    • you wrote:

      Feel free to plug this new data into your model, skew the other factors and assumptions to compensate if you wish, and editorialize all you want. I just hope you are not convincing yourself (and possibly others) that the numbers themselves equate to buy/sell decisions.

      ---

      I make judgement errors like anyone else. In my world, I go by the numbers. IMO, the KKD numbers don't add up, hence I have a position; it's a long-term position. Unlike you, I am not able to add up all the psychological factors affecting a stock, e.g. betting that ALL of the analysts will be mislead by a sss (Weisel), betting that KKD's p/r would save the day on Valentine's Day, or predicting short squeezes.

      Is your strategy better? Probably. That's why I asked you about it. But to imply that my strategy is fatally flawed because my conclusions aren't warranted is wrong. In a probabilistic sense, IMO, my conclusions aren't wrong. In other words, if I were to witness the chain of events apparent in KKD in 10 different companies, yet those conclusions were only warranted in 2 or 3, I would make large profits in those 2 or 3 instances and conceivably break-even on the other 7 or 8.

      For example, the market clearly sees nothing funny about KKD numbers (I have been "wrong" to date - i.e. KKD is one of the 7 or 8). Yet, I have made money (short synthetic calls, i.e. short the stock + short the put) because the stock "was" fundamentally overvalued (even if nothing else is funny).

      Regarding influencing others, that is not my intent. My intent is to build a historical record of my real-time observations and conclusions to later compare to what actually transpires. While I could certainly do this on my own (create a private diary), no one would believe me after the fact if I tried to show future clients or employers the analysis. This board creates a convenient, free way to do that.

      Lastly, in case it isn' obvious, readers should be aware that my writings are influenced by my biases, but that I am not being dishonest.

    • you wrote:

      Again, the Hot Doughnuts sign was on, and hot glazed were flowing through the machine. I did a low-tech estimate of doughnut production (noted how long it took a row of six doughnuts to pass a given spot on the assembly line) and saw that it was roughly 10 seconds per row of six, or 36 doughnuts per minute, so even if the machine is only making doughnuts 20% of the time, this would still exceed the target in your question:

      ---

      36 doughnuts / minute = 3 dozen per minute = 180 per hour

      This is consistent with KKD's 10-k which talks about typical capacity of 200 dozen per hour.

    • you wrote:

      I asked an employee if they hired high school students for part-time work, and they said they certainly did, and they currently needed help on the weekends. I asked what the pay would be, and the answer was $7.75 per hour. Many of the employees were part time, it was volunteered, including the person to whom I was speaking (at around 8:45 AM on a school day, by the way).

      ---

      I can't tell for sure, but you seem to be implying that my estimate of $10 per hour in labor costs is too high, given the $7.75 per hour this part-timer receives. My $10 per hour cost estimate is all-in, i.e. not just what the employee receives but what it costs the company. Just the FUTA, SUTA, and employee half of FICA add another $0.80 - $1.00. Now add in training, benefits, and the fact that full-timers probably get more than part-timers => $10 per hour is probably conservative (at least in your neck of the woods).

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