Essay on Financial Statement Analysis: Krispy Kreme

1328 Words Jan 18th, 2012 6 Pages
Financial Statement Analysis

Case Analysis: Krispy Kreme Doughnuts

1. Analysts are predicting that Krispy Kreme will be able to perform highly effectively and continue to grow rapidly in the coming two years. What are the key factors underlying the growth (at least 2)? Do you agree with their analysis? What are some potential concerns (at least 2)?

Analysts are predicting that Krispy Kreme will be able to perform highly effectively and continue to grow rapidly in the upcoming two years. Several factors can be the result of this rapid growth. Krispy Kreme’s brand is based on high quality products. They continue to excel in their field of providing top quality doughnuts to satisfy the needs of the consumer. Furthermore the
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In the case of Krispy Kreme particularly, one should acknowledge the fact that consumers may get bored of donuts and stop buying them. Donuts have been around for centuries and have been popular for many years amongst consumers. However, no one really knows if consumers will continue to purchase donuts in the upcoming years or not. In order to avoid this from happening, Krispy Kreme needs to start and diversify their products and provide consumers with products other than donuts, such as sandwiches, cocktails and such. Competition is another factor that has to be taken into consideration. No one really knows if another company opens up that would also sell donuts and may take over the market share that Krispy Kreme currently maintains. This is likely to be a long-term risk that has to be taken into account; and in order to fight it Krispy Kreme needs to distinguish itself amongst other competitors by holding a competitive advantage over them in order to keep getting consumers to come back.

2. What factors did the CIBC analysts examine to forecast sales growth for KKD in the years ended January 2003 and 2004?

a. What assumptions did they implicitly make about the number of new stores and weekly sales per store (for both company and franchise stores)?

b. What are their implicit assumptions about revenue growth from franchise operations and KKM&D?

c. Do you agree with these forecasts? Explain.

The CIBC analyst’s

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