Krispy Kreme net slides 54% in first quarter

by Eric Schroeder
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WINSTON-SALEM, N.C. — Net income at Krispy Kreme Doughnuts, Inc. eased 54% in the first quarter ended May 3, falling to $1,868,000, equal to 3c per share on the common stock, from $4,034,000, or 6c per share, in the same period a year ago. The most recent quarter was bogged down by $2,357,000 in impairment charges and lease termination costs.

Sales for the quarter were $93,420,000, down 10% from $103,641,000. Same-store sales at company-owned locations, meanwhile, rose 2.1%.

"We continue to make progress in executing our strategic plans," said Jim Morgan, chairman, president and chief executive officer. "Our operating profit improved from the first quarter of last year despite the effects of $2.4 million of lease termination costs in this year’s quarter, and we reported a bottom-line profit of $1.9 million despite those charges and $1.1 million of charges related to amendments to our secured credit facilities. While we are pleased with the improvement in our operating results for the quarter, we are not satisfied with them, and we remain focused on rebuilding the company for the long term."

Krispy Kreme completed a number of initiatives during the first quarter, including the development of the first baked goods menu items that will begin testing in outlets this fall. Those items include bagels, muffins, cinnamon and pecan rolls and Danish pastries.

In addition, the company introduced the Kool Kreme soft serve ice cream product into two additional company shops, a move that now makes the product available at a total of five shops. Krispy Kreme said it will test the product at an additional two shops beginning later this month.

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