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Krispy Kreme Doughnuts, Inc. Message Board

  • market_swami market_swami Apr 18, 2000 6:54 PM Flag

    Why Krem did not tank during crash..

    People who own KREM now are holding it with 100%
    equity because most brokers will not allow margin use
    for an IPO. SO there was no margin calls. In time,
    people will realize how dumb they were and sell. Time is
    on my side.

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    • Thank you for the article.

    • losing_my_rear_in_the_market losing_my_rear_in_the_market Apr 19, 2000 8:19 PM Flag

      When the shorts get a hold of this thing, it will sink like a rock.

    • Concerns about Krispy Kreme's reliance on
      franchisees to execute its expansion
      plan dominated the
      questions from potential investors at the road shows
      attended
      by one equity analyst, Herb Achey of New York-based
      U.S. Trust's Charlotte
      office. Mr. Achey himself
      says he doesn't see this as an issue because
      Krispy
      Kreme "spends so much time hiring regional coordinators
      and has control of all
      the equipment." Plus, he
      thinks franchisees can boost their volumes by
      adding
      what are called "off-premises" sales to grocery stores
      and other retailers.
      But other investment pros
      voiced the same worry. Peony Kao, an analyst
      for
      Renaissance Capital in Greenwich, Conn., which decided
      against investing in
      Krispy Kreme, says she considered
      the company's 14% same-store sales gain
      "very
      decent, but I don't know if they can maintain that. ...
      New stores will
      generally have higher sales in the
      first three to four years, and sales will
      drop off
      after that."
      Plus, she's concerned that the new
      shops outside the Southeast may not have
      the same
      staying power. "It's a little bit faddish," she says.

      Some experts also wonder how much of the $72.5
      million raised in the IPO of
      three million shares and
      an overallotment of 450,000 will actually go
      toward
      expansion. According to the prospectus, the company will use
      the proceeds to pay
      off $30 million in debt and
      $10 million to update older company-owned
      shops,
      some of which are 30 years old. In addition, $7
      million goes to company insiders
      as part of a
      corporate reorganization in which every share they owned in
      the
      privately held company was converted into 20 shares of
      stock in the new,
      publicly held firm, and $15 in
      cash.
      Mr. Livengood, Krispy Kreme's CEO, says he
      considers such steps to be "organic
      growth." He also
      says that after the spending goals are met, the rest
      of the
      capital raised will go to investing as a
      minority partner in the franchisees'
      expansion, and in
      additional production capacity.
      But some analysts see
      it differently. The money is "not really going to
      growth
      at all," says Lehman Brothers's Mr. Speiser. "The
      franchisees are growing, and
      the franchisees don't get the
      proceeds." Adds Ms. Kao of Renaissance Capital:
      "The $7
      million going to insiders, I wasn't so crazy about." In
      addition, Ms.
      Kao considers the salaries of the
      company's executives - Mr. Livengood was paid
      $849,536
      last year - to be "pretty high salaries compared to a
      lot of other
      companies I've seen."
      Last year,
      Krispy Kreme ended a plan started in 1994 through which
      it made
      "collateral repurchase agreements" and
      backed loans to executives and directors
      who wanted
      to become franchisees. "It's like an insider
      transaction," says Ms.
      Kao.
      (In contrast, McDonald's,
      based in Oak Brook, Ill., has never let
      its
      executives become franchisees, a spokeswoman said.)
      Mr.
      Livengood says Krispy Kreme consults with PriceWaterhouse
      Coopers to set
      its pay. The repurchase agreements and
      loans, he adds, were a way to offer
      management
      "equity ownership" in the years before the company went
      public.
      Krispy Kreme also has added two outside board members,
      he says.
      Now, the experts are waiting for the
      market to decide whether the stock of a
      doughnut
      distributor is worth 65 times earnings. Says Mr. Lombardi,
      the
      food-service consultant: "So many times you've seen cases
      where restaurant
      stocks come out, soar, and then
      reality sinks in. We'll find out in two months
      or so."

      ---
      Rick Brooks contributed to this article.

      (END) DOW JONES NEWS 04-11-00
      11:00 PM- - 11
      00 PM EDT 04-11-00

    • Several years ago Krispy Kreme started selling
      franchise rights to add stores
      outside the Southeast.
      Now, there's a sugar rush to new shops in New York
      and
      Los Angeles, where the 63-year-old formula is
      suddenly hip. Krispy Kreme has
      mastered the art of
      product placement: The doughnuts were featured in
      segments
      on several television networks last week, and have
      appeared on more than 80
      television shows in the past
      few years, according to the company's prospectus.

      One notable stumble: A few years ago, the company
      tried to increase sales
      during peak hours by adding
      smaller shops with double drive-through windows.
      But
      the idea flopped because customers missed coming into
      stores where they can see
      the doughnuts being made on
      conveyor belts, says Mr. Livengood, the CEO.
      The
      company took an $8.5 million restructuring charge in late
      fiscal 1999 related to
      the closing of five double
      drive-throughs and the write-down of five other
      inactive
      double drive-through stores and sites.
      The chain's
      sales hit $220 million in the year that ended Jan. 30,
      up 86% from
      four years ago. It has 150 shops,
      primarily in the Southeast, including 17 each
      in Florida
      and North Carolina, 15 in Georgia, 10 in Tennessee,
      and nine each in
      Alabama and South Carolina.
      Krispy Kreme plans to open 16 more outlets this
      year
      around the U.S. California and New York City already
      boast about a half dozen
      apiece, and more are in the
      works in both places. Altogether, the chain
      expects
      to have 260 shops by 2005, mainly by adding new
      franchisees.
      That's a shift from the past, when the
      company owned most of the stores
      itself. In fact, it
      still owns 58 of the chain's 150 stores, and those
      stores
      are more profitable than the stores owned by
      franchisees. Last year, for
      instance, the company's stores
      reported average weekly sales of $54,000, 42%
      higher
      than the franchisees' sales of $38,000. (Franchisees'
      sales are expected
      to increase as they move into
      higher-volume areas, according to the company's
      prospectus.)

    • Even the hottest IPOs often dip in price after an
      initial run-up. And such
      tumbles are especially common
      among restaurant stock offerings, says
      Dennis
      Lombardi, executive vice president of Technomics, a Chicago
      food-service
      consulting firm.
      Those who doubt that Krispy Kreme can
      stay hot cite several worries. They fear
      the
      company will spend its IPO nest egg not on growth but to
      pay off debt and
      compensate its executives. They
      also question whether the chain's touted
      expansion
      through franchisees will be as profitable as the
      company-owned stores
      that have dominated past profits. And
      at some point, they ask, could the
      expansion
      strategy backfire by making the doughnuts too available,
      killing
      consumers' cravings? Finally, the skeptics say shares of the
      150-store doughnut
      chain, now trading at 65 times its
      fiscal 2000 earnings of 61 cents a share, are
      simply
      too expensive.
      Of course, there's room for
      disagreement on exactly what the shares should be
      worth.
      David Long, a firefighter in Lompoc, Calif., says he
      bought 100 shares of
      Krispy Kreme on April 5 at $32 a
      share - and sold them 20 minutes later at $37.
      But
      Mr. Long believes he sold at the right time. "It's
      going to go down,
      definitely," he says. "It's been
      all hyped up by the media."
      Krispy Kreme Chief
      Executive Scott Livengood says he can't respond to
      concerns
      that the stock is overvalued, citing the "quiet
      period" surrounding its IPO,
      during which companies
      are generally prohibited from forecasting future
      growth.
      The doughnut maker has come a long way since
      1937, when founder Vernon Rudolph
      set up his bakery
      in what is now Winston-Salem's historic district,
      using a
      secret recipe bought from a Louisiana cook.
      The wholesale outfit expanded into
      retail by
      knocking a hole in the wall, creating Krispy Kreme's first
      take-out
      window. With a few franchisees, Mr. Rudolph gradually
      expanded into other
      Southeastern states, growing to
      about 50 shops by the time he died in 1973.
      Three
      years later, his family sold the company to Beatrice
      Foods of Chicago,
      which added sandwiches to the menu
      - a move that rankled longtime franchisees.
      The
      franchisees bought the company back in 1982 for about $22
      million and spent
      much of the 1980s paying off the
      debt.

    • get of this stupid fucken board (longs and proclaimed shorts)and try getting laid, you bunch of fucken losers!

    • There are some of us out there who are waiting
      for the inevitable post-IPO selloff. It's rare that
      one doesn't happen.

      Makes for good profits if
      you got in on the IPO early enough, and good buys for
      those who waited patiently, knowing that the stock
      couldn't be shorted 'til a certain date, thereby giving
      them a second bite at the er, uh, donut. :)

    • ratios for this stock? I've looked at Yahoo,
      fool, and etrade and they can't seem to agree on this
      stock's P/E ratio. For example, yahoo shows a 60 when you
      check the quote, but when you click on the profile
      http://biz.yahoo.com/p/k/krem.html
      it shows a P/E of 3 (with EPS of $12.13 last
      quarter!) I'm big-time confused, to be sure! Can someone
      who knows what they're talking about explain this? I
      have no position with this company.

 
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