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Krispy Kreme Doughnuts, Inc. Message Board

  • buylovov buylovov Apr 19, 2010 1:58 PM Flag

    More good words about KKD's turnaround


    From The Street, 4/19/10...

    "But I believe that Krispy Kreme has put the past behind it, and I recently initiated a position. While this is no longer the huge growth story it was back in 2000, I see this is a solid brand with some valuable assets and little debt. It's also a name that garners little in the way of analyst and media coverage, and that's another positive in my view.

    After losing money in each of the past five years, Krispy Kreme reported break-even results for 2010 last Friday. While revenue fell 10.1% to $346.5 million for the year, company-owned same-store sales rose 3.5%, and operating income more than doubled. For the fourth quarter, revenue fell 5.6%, but same-store sales rose 1.1%, and the company earned $500,000. Some of the revenue declines in both periods are due to the company's refranchising efforts.

    The balance sheet is also improving. Krispy Kreme ended the year with $20.2 million in cash, which is down from $35.5 million a year ago. However, the company has reduced debt to $43.5 million ($42.7 million long term) from $74.9 million ($73.5 million long term). Furthermore, the next major maturity is $40.8 million due in 2015.

    In terms of assets, Krispy Kreme, which has 83 company-owned stores and 499 franchised stores, is another example of a retailer with significant real estate assets, especially given its $285 million market cap and $308 million enterprise value. As of Jan. 31, the company owned the land and buildings for 42 stores and the building only for another 23 stores. In addition, Krispy Kreme owns a 147,000-square-foot manufacturing plant and distribution center and a 103,000-square-foot facility, both located in Winston-Salem, N.C.

    I'll be the first to admit that it's been a long road back to profitability for this company, and while it's not out of the woods yet, it has made a lot of progress. Management issued guidance on Friday that suggested that fiscal 2011 will show continued same-store sales increases in the low to mid single digits and a net profit for the year. Interestingly, the company also expects to have a total domestic store count in 2011 that would be above 2005 levels. International opportunities, where the company has opened 337 franchises in the past six years, and currently has 358 total locations, or 71.7% of its franchised locations, should help propel Krispy Kreme in the years ahead."

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    • This company will bounce up, have a nice ride. But it will not be immediate. It will be a hard slog with a trend upwards over time.

      It has a solid year, or more, of consistently improving performance. It will take a while for kkd to regain the trust of investors. That's why those that get in at these levels will be rewarded over the long haul.

      In short, the next couple years will be a rocky road stock price wise, but the price will ultimately go up from here.

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