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Krispy Kreme Doughnuts, Inc. Message Board

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  • glsierra glsierra Dec 9, 2009 10:41 AM Flag

    Share Buyback

    I would have to disagree. Debt is at approximately $50Million. Figure (at least) a 5% interest rate, that means $2.5M in interest payments alone. Their first mission MUST be to get to sustained profitability (meaning more than just a single quarter in a row of positive EPS). Once they get on better footing, they could look at share buybacks -- though I am not a fan of that approach either. There have been plenty of studies that shows buybacks dont have the impact one might expect. Dividends is more effective.

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    • Agree, especially since I'd bet they're paying a lot more than 5%.

      At least here in Seattle, they charge only 5 cents for a cup of coffee. Think that's too cheap, 50 or 75 cents would still be plenty cheap, compared to the competition and improve the bottom line.

      Made the suggestion to management, but didn't get a response.

      • 1 Reply to vjpj1110
      • I agree on the coffee at 50 cents, or even a $1.. I mean c'mon... $1 isn't too much for coffee. I think that at best their coffee is middle of the pack,,, nothing special, they should really consider going with a private label blend from a small specialty coffee roaster. People rave about Dunkin's coffee, but our Donuts are better... let's beat them in both arenas.

        As far as the stock buy-back, I am not proposing anything overly aggressive, and I think that we are cash-flow positive, most of the losses are write-downs (correct me if I am missing something)... remember the float on this stock is really small, If KKD would announce a buyback of 10% of the stock over the period of the next 12 months that would only be about $20M at these levels...

        I think that our debt level is very appropriate, and unless their is a covenant against it - a share buyback would be great for shareholders.

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