Last Thursday my family and I were passing through Orange, CA, and made a point to stop off at the KK on South City Drive. This place was rocking! On a Thursday night!!! At 9:20 p.m.!!!!!! Over twenty (I counted 22 exactly, including my car) cars in the drive through line. The parking lot was completely full. Thus, my opting for the drive through. Easily 50(+) patrons in the store and outside on the curb and at the tables. My son and I went inside to watch the donut-making machine. The place was electric. Everyone was having a blast. In the parking lot a group of maybe 8-10 teenaged boys and girls had some dance music playing and were dancing and eating donuts. It was amazing. You know how in movies like Grease or shows like Happy Days, kids and adults alike seemed to congrgate at soda shops or diners and all be having fun, dancing, etc. IT WAS LIKE THAT!!! Any way, we got our donuts and headed north for the weekend.
On Sunday morning (11-ish) we stopped in again on our way home. My wife wanted (craved) more donuts and I wanted to see how the store was operating on a sunday morning (prime donut eating time). While the festivities had subsided, the drive through still had a steady stream of 8 to 15 cars and the store had a steady stream of customers going in a coming out the doors -- all carrying two dozen donuts, some three dozen.
My conclusion is that while KK is an established and growing store in its old markets, it is poised for major success in California. This state appears to LOVE Krispy Kreme. And it doesn't hurt that the stars (Madonna) love it too and sing its praises everywhere they go.
This morning, I read the following excerpt:
The Wall Street Transcript Publishes Investing in IPOs Issue
[P]erhaps unknown in many parts of the country, is Krispy Kreme Doughnuts (Nasdaq: KREM - news). ... [T]his is a neat company, along the vein of 'if you like the donuts, buy the stock.' ''
I too share your concern about growing too quickly. But, my sense is the compnay is far from that particular problem right now, at least in new markets. Two quick questions, anyone, (1) what is the history and current performance of KK in Arizona, Iowa, Kansas, Missouri, Nebraska, and Nevada? (2) How is performance in states where serious chain competitors exist (e.g., Dunkin Donuts)?
It JUST DOESN'T MATTER. Posters on this board can tell doughnut stories out the wazoo but there is NO WAY KREM deserves a PE multiple of almost 70. When the shorts attack this you can take heart that KK makes a mighty tasty pastry. Wake up people, THIS IS A DOUGHNUT SHOP!
YOU wake-up! Price to Earnings ratios for many tech stocks have been thousands of times earnings and on much less credible growth prospects than what Krispy Kreme will achieve. Is it the cost of market research scaring you? The cost of all those lofty salaries? The employee stock option and retirement plans? Competition from Dunkin Donuts and Winchells? This stock is going to grow, blow-up like donut batter submerged in hot fat!