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Krispy Kreme shares fall after 4Q falls short

NEW YORK (AP) -- Shares of Krispy Kreme declined Friday after the doughnut company issued a forecast for its fiscal 2014 that fell short of Wall Street expectations.

THE SPARK: After the market closed Thursday, Krispy Kreme Doughnuts Inc. said that its fiscal fourth-quarter net income dropped sharply because of a one-time gain in the previous year. Its adjusted profit and for quarter and forecast for 2014 fell just shy of analysts' forecasts.

BIG PICTURE: Krispy Kreme, headquartered in Winston-Salem, N.C., is the second-largest doughnut chain in the U.S. behind Dunkin' Donuts. It went public in 2000 but then nearly collapsed after rapid expansion and an accounting investigation by the Securities and Exchange Commission.

The company brought in new management, closed stores, lowered its debt and changed its business model to cut costs and improve profitability. Krispy Kreme now operates more than 740 locations in 22 countries.

For its fiscal 2014, the company says it expects to earn between 53 cents and 57 cents per share. Analysts were looking for 58 cents per share.

For the period ended Feb. 3, it said it earned $4.8 million, or 7 cents per share. That's compared with $143.5 million, or $2.01 per share, in the year-ago period. Excluding the impact of a gain related to deferred income tax assets, it earned 11 cents per share versus 6 cents per share a year ago on an adjusted basis.

Revenue rose 16 percent to $118.1 million.

Analysts polled by FactSet expected earnings of 12 cents per share on revenue of $117 million.

Revenue at company-owned locations open at least a year rose 7.5 percent during the quarter, the 17th straight quarterly increase.

THE ANALYSIS: Janney analyst Mark Kalinowski said his "Neutral" rating on the company reflects a mix of opportunities and risks. On the upside, he noted the brand seems to undergoing a "re-invigoration of sorts." On the other hand, he noted that the company will face tougher year-ago sales comparisons as the year progresses.

SHARE ACTION: Krispy Kreme shares fell 9.7 percent, or $1.45, to $13.49 in morning trading. The stock has rallied 44 percent in the year to date.