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Krispy Kreme Doughnuts, Inc. Message Board

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  • meme4564564 meme4564564 Jun 16, 2006 10:02 AM Flag

    Buy KKD - The long argument

    even though you did not provide a valuation analysis of why you think the stock should double (i.e. worth $16 pr share, i.e. worth $960mm in market cap), you are by far, by far by far, the smartest long ever to have come here in the past 18 months, and maybe even the smartest of all time. So first of all, welcome to the board.

    Now. You have done your work, looked at filings, and you are very confident and even got some things right. But your analysis contains some glaring mistakes and false assumptions. I'm gonna provide very short comments to you as responses.

    First of all, 3 things:

    1)KKD is dependent upon generating value from 4000 sq. ft. commercial properties, never done, franchisees never done, no one has any clue how to do.

    2)you need to know that the lenders have renegged on $80mm of $225mm worth of commitments. So far, the lenders disagree with you. You also need to read the loan agreement on the SEC website (04/07/2005) and google KZC.

    3)you need to read this blog, quitefrankly, in its entierty. Blog by a KKD franchisee.
    http://protectorsofthekrispykremebrand.blogspot.com/

    now the short answers:

    <<dealing with a few bankruptcies>>

    no. filing the bankrupcies by will.

    <<erage weekly sales in company stores are coming back in a healthy way>>

    wholesale not healthy. KKM&D franchisee rip-off not healthy.

    <<Sure, the franchisee stores are not doing extrenelly well, but the worst must be over for them (the storm for KKD had its peak in 2004 and 2005, the same must be true for the franchisees). >>

    -KKD sales in FY2006 26% down from FY05
    -KKD sales so far in FY2007 down even more
    -Even brash CEO admits bottom not reached
    -Chairman said predicting profitability is speculation
    -go read blog
    -more bk's in FY2006

    <<Besides, all of the franchisees are still standing, and if they weather the storm so far, chances are they will make it.>>

    huh? so if 99 bottles of beer were on the wall, 40 fell, 59 are left, you predict that none of the 59 will fall? go read blog.

    <<Looks like KKD has a chance to become profitable once again at the end of next quarter.>>

    you assume franchisee revenue stabilizes. you assume no increase in LIBOR. Old ADs all need to turn around the 4000 sq.ft. factory stores otherwise bye bye. They have made this clear. they also pulling away wholesale sales from under KKD because it's not profitable to them (but to KKd it IS pure profit..so..ouch). go read blog.

    <<Looks like the rumors of blatant fraud were false.>>

    go read SC report - SEC filing of 08/10/2005 (08/11?). read the entire document. Livengood will go to jail barring a miracle.

    <<Notice also that the trends from last quarter look very, very positive.>>

    This week buffalo store closed, wholesale being pulled out. go ask the franchisees what the trend is. most of KKD's profits come from 4-6% + markups, not company owned stores. Look at other franchise businesses. compare business models. other restaurants don't do razor-thin margin wholesale, because they are actually REALLY restaurants! "razor-thin" direct quote from cooper. please explain "smaller regional company" quote miami herald 12/24/2005.

    <<Once Cooper and all of the accountants and lawyers leave>>

    cooper not leaving until unfriendly franchisees are gone. cooper not leaving until every single JV is undone. cooper not leaving until every lawsuit resolved. cooper not leaving until every BOD member (who were supposed to get out by now) feel safe to get out.

    <<I believe this stock will at least double within the next 12 months>>

    the class action shareholder lawsuit could cost $50-$500mm. KKD has no such cash. Only alternative is to dilute which requ

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    • >-KKD sales in FY2006 26% down from FY05
      -KKD sales so far in FY2007 down even more
      -Even brash CEO admits bottom not reached
      -Chairman said predicting profitability is speculation
      -go read blog
      -more bk's in FY2006<
      A lot of these reductions are a direct result that they closed bad stores. This is good!
      And as to bk, we have seen the last ones involving KKD directly. If another franchisee fails (which I don't think will happen), it won't affect KKD directly like with the others.

      >huh? so if 99 bottles of beer were on the wall, 40 fell, 59 are left, you predict that none of the 59 will fall? go read blog. <
      Another one may fail, but I don't think this is too likely. The time to fail was last year.


      >you assume franchisee revenue stabilizes. you assume no increase in LIBOR. Old ADs all need to turn around the 4000 sq.ft. factory stores otherwise bye bye. They have made this clear. they also pulling away wholesale sales from under KKD because it's not profitable to them (but to KKd it IS pure profit..so..ouch). go read blog.<
      Well, they will retrofit some of these stores slowly. It can be done.

      >go read SC report - SEC filing of 08/10/2005 (08/11?). read the entire document. Livengood will go to jail barring a miracle.<
      I glanced thrr what they published. As I recall, they pretty much blamed Tate & Livengood. I don't recall reading anything about blatant fraud. Poor decisions yes, not much more than that.

      ><<Notice also that the trends from last quarter look very, very positive.>>

      >This week buffalo store closed, wholesale being pulled out. go ask the franchisees what the trend is. most of KKD's profits come from 4-6% + markups, not company owned stores.<
      As was commented here recently, only 1-2 stores have closed in the past two quarters. I think this is very positive!

      • 3 Replies to undervalued_investments
      • undervalued_investments,

        If I was out walking thru the cyber-woods, and I came across a creature that was part "wannabe oracle", and part "condescending, college professor", I don't think I'd take what it says all too seriously. My advice, for what it's worth- "stick to your guns".

        (just in case, for clarity- the "creature" I'm referring to is certainly not you)

      • <<A lot of these reductions are a direct result that they closed bad stores.>>

        I think I mentioned sales becuase you did. don't turn things around on me. Ok now you want a real challenge? EBITDA and CEBITDA. Down probably 90%+ from 2004. Explain to me how this is supposed to work.

        <<Another one may fail, but I don't think this is too likely. The time to fail was last year.>>

        did you read the blog in its entirety - yes or no? ....look...the only way you can be successful is if you re-question your assumptions all the time. if you wanna convince yourself that you are right it's fine but you won't convince people like us who have been putting hours every week for 1-2 years into this stock if you do not expand your knowledge.

        Challenge for you: analyse KKSF (KK South Florida). Explain to me how this entity will avoid liquidation.

        <<Well, they will retrofit some of these stores slowly. It can be done.>>

        by Brewster? by Cooper? if can be done why have they lifted 0 fingers in 18 months? have you ever analysed a corporate turnaround before? if you did, you'd know the difference between management that wants/knows to turn around and management that does not.

        <<I glanced thrr what they published. As I recall, they pretty much blamed Tate & Livengood. I don't recall reading anything about blatant fraud. Poor decisions yes, not much more than that.>>

        glancing at women on the street is fine, but not at SC reports. You have soooo not read the report my friend. Key phrase: "one penny per share". Key word: "restatements". Misstating profitability deliberately is a criminal matter. not civil. criminal. And the SC says that Livingood did that.

        <<As was commented here recently, only 1-2 stores have closed in the past two quarters. I think this is very positive! >>

        i think its negative. closing stores requires an unusual 1-time cash outlay, did you know that? franchisees have many reasons for why they cannot close closes including Cooper flat out veto'ing it because he wants the royalties, and going dark problems etc. Go read the blog.

        Look as I said you are very smart, but now, until you read the following documents in their entirety, there is no point of continuing the debate.

        a) loan docs and ammendments
        b) GCFF blog
        c) SC report
        d) 10-K

        trust me, i'm not being mean. i read them. they make all the difference.

 
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