Krispy Kreme suffers loss in second quarter

by Eric Schroeder
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WINSTON-SALEM, N.C. — Krispy Kreme Doughnuts, Inc. sustained a loss of $1,907,000 in the second quarter ended Aug. 3, which compared with a loss of $27,040,000 in the same period a year ago. A number of impairment charges contributed to the loss in the most recent quarter, while last year’s results were adversely affected by impairment charges and lease termination costs of $22.1 million.

Sales for the quarter were $94,237,000, down 10% from $104,098,000. Krispy Kreme said the decline reflected decreases in company stores and KK supply chain revenues, partially offset by an increase in franchise revenues.

System-wide sales for the second quarter of fiscal 2009 increased approximately 4% compared with the second quarter of fiscal 2008, reflecting a 16.5% increase in store operating weeks, partially offset by a 11% decrease in average weekly sales per store.

During the second quarter, Krispy Kreme opened 31 new stores and closed 7, bringing the total number of stores systemwide to 4494.

"We are not satisfied with our financial results for the second quarter," said Jim Morgan, chairman, president and chief executive officer. "Some of the shortfall was due to external factors, but we must move forward on implementing our key strategic initiatives in order to achieve the positive long-term results we believe are possible."

The initiatives Mr. Morgan mentioned included building new small retail concept shops in select company markets, bringing "intense focus" to the basics of shop operations to improve consumer experience and financial results, developing and testing new menu offerings, and providing increased supply chain support to its global business.

For the six months ended Aug. 3, Krispy Kreme posted net income of $2,127,000, equal to 3c per share on the common stock, up from a loss of $34,438,000 in the same period a year ago. Net sales in the first half were $197,878,000, down from $215,016,000.

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