Financial Analysis and Forecasting for Kkd

3538 Words Oct 25th, 2011 15 Pages
The Fall of Krispy Kreme Donuts

MBA 6154 - Dr. Plath
By:
Jon Plyler
Luke Sagur
Introduction

Since its IPO in April 2000, Krispy Kreme grew to be a top pick of Wall Street Analysts. The company’s growth seemed unstoppable and Krispy Kreme was able to beat Wall Street’s expectations. Krispy Kreme continued to outperform until 2004 when some accounting woes were brought to light and analysts starting noticing other anomalies that indicated that things were not quite as good as they seemed. The firm’s stock price quickly plummeted from its peak and lost more than 80 percent of its value in only 16 months.

This case study focuses on the use of financial statement analysis, and other factors that an equity analyst would use to
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The associates were able to carry on with business as usual but the Area Developers are responsible for helping to grow the business. Each Area Developers incur a one-time franchise fee of up to $50,000 then pay up to 6% of sales to Krispy Kreme as a royalty and 1% of annual sales as an advertising fee. The franchise royalties account for approximately 4% of Krispy Kreme’s revenue.

Krispy Kreme – By The Numbers: Financial Statement Analysis

Krispy Kreme’s investors enjoyed a quick return on their investment after the IPO. By the end of 2000 the stock price had doubled, then shot to a high of 4.5x the IPO price by mid-2001. Krispy Kreme was one of the new glamour stocks on Wall Street, but from the standpoint of an educated investor was it healthy enough to support the success of its stock? An analysis of the Krispy Kreme financials should give some insight into the health of the company.

Krispy Kreme’s revenue increased every year between 2000 and 2004, from $220m to over $665m. Along with growing revenues, the operating and net profit margins also increased every year. The operating margin increased from just under 4% in 2000 to over 15% by the end of 2004 and the net profit margin increased from just under 3% to over 8% during the same time period. The ROA and ROE though the time period were relatively steady at an
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