Bad signs of company’s failing health were showing during the first quarter of the current fiscal year which ended last May 2 when the company informed about its first quarterly loss since going public in 2000. Krispy Kreme booked a net deficit of $24.4 million for the period stated, that amount included a $34.3 million charge related to the company’s spending on purchase of Montana Mills bakery-cafe chain, in 2003 for $39 million. For the vivid comparison we should look at the following figures: quarter, ended Oct. 31, Krispy Kreme reported a net loss of $3 million, meaning- 5 cents a share, versus a profit of $14.5 million, or 23 cents a share, in the quarter https://npfinancials.com.au/
one year ago. The revenues of $170.1 million accounted for only 1.4 percent increase compared to previous year results. Krispy Kreme said that for the eight weeks ended Dec. 26 average weekly sales fell by18 percent in all company’s operations and 25 percent at corporate factory stores, as opposed to prior-year levels. In the sight pf current events Krispy Kreme began an internal audit that led to restated financials for fiscal 2004, and as a result those amounts restated earlier in January, 2005 would reduce last full-year profits of 2004 by 6.6 percent to 8.6 percent, or between $3.8 million and $4.9 million. Also the company is likely to restate the records for the first and second quarters of fiscal 2005. All of the actions urgently taken by the company are necessary for the company’s actual survival, as they have lost the trust of both their shareholders and the government. In the recent year company’s sales growth from their stores were as little as 0.1% and Krispy Kreme said it would slow unit growth and would only be opening 75 new stores except of 100 scheduled. This strategic move is directed on the reevaluation of company’s overall strategy and also it would save them money which they have to repay to their lenders, currently a sum of $90.9 million.
As already has been mentioned the stocks earnings fell considerably with the profit loses, but the prices of shares have been falling since last May as well. The company’s stock price volatility which mainly began in May was resulted by the company’s first revealed negative earnings position. At the same time Krispy Kreme blamed their weakening sales on the low-carbohydrate diet trend, rather than taking a closer look at their own operation which caused the situation. Those announcements resulting in reduced company’s control sent Krispy Kreme’s stock dropping 29 percent in one day. Moreover Krispy Kreme’s initial quarterly loss, which was followed by the dis