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Krispy Kreme Doughnuts, Inc. Message Board

  • DICKNIX0N DICKNIX0N Mar 13, 2004 8:26 AM Flag

    I dont get it

    if same store sales, franchise sales, total sales etc are all up, then how can 'average weekly sales' be down?

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    • <<there is much more competition in the coffee business than in the doughnut business.>>

      Once a customer is in a KK store to buy donuts, it doesn't seem to be too formidable a task to convince them to buy coffee or a soda.

      Real healthful meal. Donuts and soda.....diet of course...must watch those calories.

    • "My guess on beverage revenue is that it represents between 5-10% of revenue
      currently."

      Is this just coffee or does it include all of their beverages, including dairy products?

      Where did you get your number from?

      What basis do you have for your WAG?

    • you wrote:

      To be fair, the only point where I see "real growth" in KKD is with their beverage program. Thgey mentioned in the CC something like they want to double their beverage sales in 5 years. But let's not forget, there is much more competition in the coffee business than in the doughnut business.

      ---

      The cc comment on beverages was in response to a question by analyst Wolf who prefaced his question by stating that a source within kkd had told them that the beverage initiative "hadn't taken hold".

      Tate didn't mention any numbers; he said that the target of doubling beverages as a % of revenue was "right on target" whatever that means. They did mention that the frozen initiative would be done in the spring (in time for warm weather) and the espresso initiative would be done in the fall (in time for cold weather).

      My guess on beverage revenue is that it represents between 5-10% of revenue currently.

    • "You are only taking into account N.America. KKD has also managed to penetrate Europe. Intl business will drive this stock higher also. Would you agree? "

      No, I don't agree. KKD has managed to penetrate Europe? They have 1 store in England. And they have what, 2 stores in Australia? And one in Mexico? International expansion beyond N. America is a tinny fraction of their store base in North America.
      Sure, they can go to China and Japan and open 1000 stores in 10 years, but is this realistic? How about risks? Most of the growth has come and will continue to come from N. America.

      "Secondly, your definition of Growth is only taking into account the number of store openings. Although this is a good way to gauge expansion, it's not everything. They will not need to grow store openings by 25%, only 15% - Same stores increases are at 10%."

      They are basically "growing profits" by opening new stores. Didn't you hear that margins are down? Same store sales are also down (as others have pointed out, BIG difference with KKD's metric, "comparable store sales"). So they are buying their growth by opening more and more stores. This game can only go for so long. Opening stores is very expensive. Sooner or later they will have a big hang over from all these store openings.

      To be fair, the only point where I see "real growth" in KKD is with their beverage program. Thgey mentioned in the CC something like they want to double their beverage sales in 5 years. But let's not forget, there is much more competition in the coffee business than in the doughnut business.

    • Same store sales are not 10%. Comparable store sales are said to be 10%. There is a big difference. On the cc management refused to go into comparable store sales when a caller brought it up but cutoff further questions by ending the call.

    • Did you listen to the cc? KKD claimed expansion or capex was going to come from operations. Bank borrowing was never mentioned.

    • <<Every covering Analyst is forcasting this,>>

      One copies from the next.

    • You are only taking into account N.America. KKD has also managed to penetrate Europe. Intl business will drive this stock higher also. Would you agree?

      Secondly, your definition of Growth is only taking into account the number of store openings. Although this is a good way to gauge expansion, it's not everything. They will not need to grow store openings by 25%, only 15% - Same stores increases are at 10%. Please don't forget about same store increases, which have a compounded effect. So, take 500 and multiply by 1.15. At the end of the 5th year, you will have 1005.

      Keep in mind that the true definition of growth is all about increasing Profit Margins and Net Income. The stock tumbled last week due to a 2% decrease in Margins. This is expected though when you are investing a ton of money back into your business (new stores).

      To your final point regarding Capital Investment funds - Go check out their Balance Sheet. Under Liabilities, look at the increased debt in 2003. You will see a sharp increase - there's your investment capital. Of Course this is also is part of the reason that the stock has fallen.

      KKD has grown an avg of 43% of the past 5 yrs, and they WILL grow 25-30% over the next five. Every covering Analyst is forcasting this, and I believe it as well.

      Hope this helps.

    • >>KKD is profitable and will continue to grow between 25-30% over the next five years. Relatively low PE, and their product is popping up everywhere. Buy and hold for 5 years. <<

      Can you care to explain how they will grow 25-30% for the next five years? The trends don't support this.
      They closed the past fiscal year with about 380 stores, after opening about 100 new stores.
      This fiscal year, they announced they will open about 120 new stores, for a store growth of about 25%. They will probably need to grow store openings by at least 25% next year to produce the earnings growth. But wait, they have said before that they will reach saturation in North America when they get to about 740 stores (they revised this number during the last CC and said they will reach saturation with between 750-1000 stores).

      So, they will end the year with about 500 stores. At the new store opening rate, they will reach 750 in less than 2 more years. So, by their own admission, best case they will reach saturation in about 3 years.

      And never mind the huge cost involved in opening all those new stores, or the "secret" place where they will find all of the money required to open these stores.

    • "Just look at the chart. There was plenty of room for profitable shorting opportunities."

      No question....point is those opportunities were not the result of the increasing price of butter, KKD's alleged bookcooking, or any of the other fairy tales di_vur_se _fi has tried to proliferate, was it?

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KKD
15.52-0.26(-1.65%)Jul 10 4:01 PMEDT

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