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Krispy Kreme introduces new CEO

Tony Thompson

Tony Thompson

Krispy Kreme Doughnuts Inc. used today’s formal introduction of new chief executive Tony Thompson as another way to present a forward-thinking approach to its shareholders.

Thompson took over as chief executive and president June 1, according to the Winston-Salem Journal. 

Thompson and Jim Morgan, his predecessor who serves as executive chairman, focused comments on what they consider as achievable future goals even as clouds linger over the company after it issued disappointing financial news three of the past four quarters.

Those goals include:

Double-digit sales growth over adjusted earnings per share in the previous fiscal year.

• Establishing a customer loyalty program.

• Adding menu choices.

• Expanding the smaller factory shop concept domestically.

• And adding brand licensing opportunities.

The two officers also emphasized Krispy Kreme’s debt-free status as a positive growth development.

“We have enormous untapped opportunities,” Thompson said. “Krispy Kreme is squarely on intelligent and deliberate offense. “Our future is brighter than ever, and it’s glazed.”

The officers did not formally address the company’s recent struggles to meet investor and analyst expectations. After each disappointing after-market financial report, its share price tumbled in next-day trading.

The share price of $16.20 at 11:30 a.m. today represents a 39 percent decrease from the 52-week high of $26.63 on Nov. 21.

However, the stock has not broken through the 52-week low of $15.70.

The latest blow came June 2 when Krispy Kreme lowered its earnings for fiscal 2015 from a range of 73 cents to 79 cents to a range of 69 cents to 74 cents, even though revenue during the quarter was up less than 1 percent to $121.6 million, and net income rose 20.7 percent to $9.6 million.

Morgan responded to a shareholder question about the disappointing quarters by saying “our job is to keep moving forward and making right decisions for the long term.”

For example, Morgan spoke about Krispy Kreme going from no profit in fiscal 2010 to making $43 million in fiscal 2014.

“We’re not quite sure why it got to $26 in the first place and why it is gotten back to $16 now,” Morgan said. “For shareholders who are here for the long term, not days, weeks or months, it will all come out in the wash.”

The main concern expressed by analysts since 2010 is whether Krispy Kreme can avoid expanding this time beyond its ability to handle growth.

The company has a goal is more than 900 global and 400 domestic shops by the end of fiscal 2017. It currently has 855 domestic and global shops.

Jonathan Heller, an analyst with TheStreet.com, said he remains a believer in the Krispy Kreme turnaround because of “re-surging sales, a growing international presence, along with a healthy amount of owned real estate.”

“When a company turns around as remarkably as Krispy Kreme has, renewed attention can bring high expectations. When those expectations are not met, the stock will suffer.

“I never expected a straight-up, uninterrupted rise in Krispy Kreme stock,” Heller said. “In fact, at times over the past four years the stock has gotten ahead of itself.”

Amal Singh, an analyst with The Motley Fool, said that “considering Krispy Kreme is already under pressure from peers, such as Starbucks and Dunkin’ Brands, reduced guidance doesn’t bode well for the company.

“However, short-term pains are never a worry for long-term investors.

“To come out of its slump, Krispy Kreme is trying to enhance its global presence by making its marks in the digital, social and interactive media channels, which will help keep the brand at the top of customers’ minds.”

1 Comment

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