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Krispy Kreme Doughnuts, Inc. Message Board

  • real_space_potato real_space_potato Dec 28, 2010 5:25 PM Flag

    The Problem with Krispy Kreme

    It is a good company, that makes an excellent donut. Furthermore, they have done a fine job of executing a corporate turnaround.

    Aside from this, the investor euphoria, like the donuts themselves, is mostly air! It is a mature company with relatively stagnant sales growth that is being valued like a hot biotechnological startup or high tech IT firm.

    It is really only worth 20 P/E. There is no reason considering market saturation to value it any higher. Yeah - It's a great donut, but like Ben and Jerry's ice cream, or Green Mountain coffee, eventually the market catches up.

    Imitators get close enough to put an upper limit on pricing. People will no longer pay $11.95/lb for Green Mountain coffee when they can get Seattle's Best, just as good, for $8.95 - Or $4.95 for a pint of B&Js when California producers like Edy's can do something real close for $2.99

    Yeah - KKD is a great donut, but sales are limited and this stock isn't worth any more than $5.

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    • It'll take me too long to explain the logic, math, analysis... so short version: This stock will hit $10 in first half 2011 (barring general overall market meltdown like we saw in late 08/early 09.

      For the next few quarters we are going to see volatility leading into the announcements and after. Some will jump back in shorting the stock now (driving price down a little bit). It'll climb back up on the performance and fundamentals leading up to announcement then the shorts will move to cover causing it to spike when the shorts will move back in. We'll see this cycling phenomenon for the next several quarters (or all next year).

    • No room for growth?? They have 600 stores WORLD WIDE with ONLY 230 in the USA. They are moving to get CLOSER to the customer opening MORE smaller stores. Dunkin Donuts has 8,800 store WITH 6,300 in the USA.

      Under the new business model, "hub" stores will be closer to 3,000 square feet, and provide product to smaller "spoke" stores of 1,200 to 1,600 square feet. Pedestrian outlets, such as walk-up counters in airports and train stations, probably would not be much larger than 200 square feet, Morgan said.

      Beyond store expansion, the ability to grow through brand extension (especially with regard to an EXCELLENT brand like KKD) is almost limitless.

      This is so OBVIOUS it almost seems ridiculous to even post, but..... just had a donut and couldn't resist.

      P.S. have you ever heard of China, look into it, it's a KIND OF A BIG DEAL. Okay, okay, I stole that from the Ford Fiesta commercial.

    • This is one of the important lessons of the severe recession we just endured. When consumers come out the other end of something like this, they rethink how they spend money.

      They still buy premium goods, but consumables that might once have been a weekly thing become a special purchase for birthdays and holiday parties. Luxuries like having three cable movie channels get trimmed back to one.

      This is going to be true independently of how affluent society becomes over the next five years.

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