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Krispy Kreme Doughnuts, Inc. Message Board

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  • glsierra glsierra Apr 24, 2010 8:46 PM Flag

    with all respect to mgmnt

    lzdsl02000, I agree with you except for one minor thing. I dont think it will take 7-10 years for that to happen.

    I believe, presuming no market meltdowns or unforseen repeat of the shananigans of previous CEO(s), that the stock will be at the $7 range at the end of this year. Trade $7-$10 window in CY 2011, and into the $teens by 2012.

    Here's what I think needs to happen to get there though.

    -- They need to keep paying down debt (to near $0 within 2 years). Ordinarily its considered a "good thing" for companies to have some debt on the books in order to lower their overal cost of capital. HOWEVER, given the troubled ethical and financial past, they need to rebuild trust so to speak. I think having near zero debt and good performance will regain that trust.

    -- They need to smartly grow the business. International is good, but am hoping they are being smart in how they do it. Need to develop a degree of mass 'touch' in the respective countries to gain economies of scale, etc.

    -- They need to maintain product quality. Frankly, their talk of "longer shelf live products" does concern me. No matter what they do, longer shelf life products will be "LOWER QUALITY" product by definition. Thus, detracting from their brand. Nothing like a warm glazed doughnut. Yum!

    Overall, its a great brand. Huge fan loyalty! Look at companies with huge loyalty and you will see that they are trading at 2, 3, 4, or even 5 times sales. KKD is well below 1x sales!

    I am hoping that mgmt is smart enough to know what their brand equity is and dont do anything to tarnish it!

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    • Oh, and I forgot to mention. The biggest thing that will boost the stock....????

      Once they get to the position where they are sustainably profitable, they need to seriously look at initiating a dividend.

      That decision alone will add significant $$ to the price of the stock. The ultimate in signaling to the market that they are here (profitable) to stay. Doesn't have to be huge.... about 1% will be huge!

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