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Krispy Kreme Doughnuts, Inc. Message Board

  • clanmacallan clanmacallan Mar 20, 2001 11:46 AM Flag

    This certainly makes it more

    interesting. I covered my puts last week and am reestablishing now in the Apr & May 37 1/2's. Sooner or later, someone is going to point a big ole spotlight at KREM and ask why it's going for 50+ forward earnings.

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    • Tripton,
      I know you didn't ask for my any advise, but FWIW maybe you can learn from my mistakes...
      (and for full disclosure, I am short KREM)
      I bought a high tech company in April '98 at a split adjusted $8/share. It was a profitable company with a real product and lots of cash in the bank, good management etc. It flew to over $95/share by 2000. Along the way, I sold 25% of my holdings but held steadfastly to the remaining 75%. People on the message boards, some apparently intelligent people, were saying that the stock was overvalued but my response was like yours: "I am a long term buy and holder. If this stock falls 50%, or even more, I will weather the storm and look back again in 3-5 years".
      As you might have guessed, the stock is now $5/share and, while I netted a profit due to the shares I sold, I "lost" hundreds of thousands in "paper profits". If I had to do it over again, I would have bought puts as a hedge.
      So my unsolicited advise to you, buy some out of the money puts with an expiration date as far out as you can. How bad would you feel if this stock went to $5. Don't say it can't happen. It happens all the time. It happened to me.
      Best of luck to you.

    • Were I to sell now I'd have short-term capital gains tax to pay.
      My horizon is 3+ years so I'll only incure long-term CGs then and I fully expect the price to be more than it is today.
      Even if there was a drop in price later this spring, I fully expect $50/share in the next couple of years and that's a 65% increase from today's price.

      Remember the most important thing I've learned in retirement is not to sweat the small stuff. And day-to-day micro-worrying is small stuff. I'll leave that to shorts and day-traders who sometimes have a worse view of the horizon than Mr. Magoo. Not you tho tarbaby.

    • Tripton, I was really hoping that you had liquidated some of your holdings and taken at least some of your profits off the table. I wish you well in the upcoming months.

    • Sarcasm is my middle name.
      The CNBC-bashers are the most ignorant posters in Yahoo-land. They blame CNBC for everything.
      I am as unabashedly pro-CNBC as any posters are _BASH-full.

      I remain long and proud to be so. My horizon on this POS is beyond any short's horizon.

      But thanx for asking, tar. You are a sharp pencil.

    • No, they're not counting them as new stores, they're using these off premise sales to artificially inflate the comparative store revenue numbers. Why would they do this? Because suckers that don't realize that this only helps in the initial year of off premise sales assume that this type of same store sales growth will continue indefinitely. They buy the shares as they're freed from the lock-up, and then these people are left holding the bag.

    • I just came from the grocery. Krispy Kreme's are all over the in Day old and this is where Krispy Kreme looses it. I love them fresh/hot but they are not fresh/hot sitting in the grocery stories and service stations on every corner......

      Perhaps they are counting these locations as new stores.....

      Reminds me of Home Shopping Club......"look out below"


    • nc you make very good points. I have no problem with what you say. There are a lot of good posters on this board. Just a few no nothing wannabes. Goodluck.

    • You also stated in one of your posts, "I just know same store sales is not an over ruling number if your opening up a lot of new stores every year unless thos stores do not perform well. I have to assume they see good growth if they are going to spend so much dollarson that huge plant but i do not know anything for sure."

      The reason that analysts look at same store sales growth is due to the fact that companies can hide the fact that sales of individual stores are decreasing by simply continuing to open additional stores. However, since the rate of growth in the number of stores for KREM is going to decline as well, they won't be able to continue to hide this fact for long. Regarding your comment about the huge amount of money required to open a new store, management has stated in its registration statement that it intends to continue to grow its store base through the opening of franchise stores as opposed to company-owned stores. Therefore, it is the franchisees that have to make the huge capital expenditure to open a new store, not KREM. However, it also means that KREM only realizes a small percentage of the revenues from the opening of new stores.

    • Your last statement is very key to this discussion. You said, "If all the stores were already set up and calculated in to the earnings then a p/e of 20-30 might be fair but these are all stores that have yet to be opened and are huge cash cows the first months they open."

      KREM management has projected EPS growth of 25%. However, they have admitted that same store sales growth will drop to the mid single digits (Some analysts say negative, but we'll give KREM management the benefit of the doubt for purposes of our discussion). Where does this extra 18% growth in EPS come from? From the opening of new stores. The projected revenues and cash flows to the company from these new stores is already priced into the stock.

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