Decline Of Krispy Kreme

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Upon review, Krispy Kreme Doughnuts, Inc. is a struggle company continuing towards decline. In reviewing the information collected, two questions were presented. The two questions included: the health of Krispy Kreme and the reasons for their decline. To follow will be the justification for the decline in Krispy Kreme, alternative issues, and risks Krispy Kreme is facing. Upon reviewing the information, there are variety of issues that Krispy Kreme. These issues including the restatement of financial statements for the fiscal year ending February 1, 2004, and the first two quarters of 2005, their growth and saturation in outside outlets, and high reliance on profit from new franchisees. The first issuing plaguing Krispy Kreme is the announcement…show more content…
Their outside growth and saturation in various outlets are results of each other. Krispy Kreme became a publicly traded company in April 2000, with their initial public offering. At the time they had 144 stores and in their five year plan had a projection of over 500 stores (427 stores in August 2004) in addition to over 32 international stores. Upon this expansion, Krispy Kreme, have expanded their reach outside of their factory store, as seen in calculation 1, where nearly 75% of revenues come from sources other than factory stores. This high reliability on outside sources of revenues leads into another issue facing Krispy Kreme. The additional issue, is the correlation of their profits due to the growth of franchised stores, (see calculation 2 for initial fees). Besides the issues presented above there are additional examples of Krispy Kreme Doughnuts, Inc. decline that are found in Exhibits: 4, 5, and 6. Exhibit 4 and 5 shows trends of analysts’ recommendations to buy, sell, or hold Krispy Kreme stock, and Consensus Earnings Per Share Estimates. These two exhibits are correlated because as one falls or rises the other tends to follow, (see excel: Exhibits). Exhibit 6 shows the stock price of Krispy Kreme Doughnuts, Inc. in comparison do the S&P 500 index. As the S&P 500 index stayed near its value of 1.00, Krispy Kreme has extremely volatile in regards to the S&P…show more content…
Due to its own internal investigation and the Securities Exchange Commission, Krispy Kreme announced it would be delayed in filing their financial reports due to their financial restatement the noted risks occur. Having to delay their financial reports, Krispy Kreme faces the risk facing to default on a $150 million credit facility. If they default, Krispy Kreme’s credit facility would be ended and they would be forced by their various banks to repay any and all outstanding balances. With their stocks trading at under $10 a share, the issue of financial restatement, and the risk of default has caused Krispy Kreme’s stock to be on the verge being eliminated from the New York Stock

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