This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Krispy Kreme Is Alive, Kicking and Making Lots of Dough(nuts)

NEW YORK (TheStreet) -- Another quarterly earnings report, another bad day for Krispy Kreme (KKD - Get Report).

Seems as though the doughnut maker is always coming up a bit short of expectations, as fellow Street.com columnist Richard Saintvilus pointed out Wednesday. On Tuesday, the stock fell nearly 15% after reporting in-line earnings, but lower than expected revenue, and lower earnings guidance for the year. The company also took a severe beating in the financial press. Shares closed Thursday at $16, down 16% for the year to date. Not sweet.

My vantage point and interpretation are a bit different than most. Comes with the territory as a value investor and part-time contrarian.

Krispy Kreme has a fabled past -- it was one of the great cult stocks after going public in 2000, 63 years after opening its first store. It was also a hot stock in its early years, rising to nearly $50 a share before the trouble started.

The trouble, in this case, was overexpansion, bad management and poor accounting. The gravy train stopped swiftly, and this was ultimately a $1 stock by 2009. The company lost money for five consecutive years between 2005 and 2009, was forced to close stores, and fell off investor's radar.

Count yours truly as one who'd forgotten the company was still public until I stumbled on it while doing some research in late 2009. By then it was under new management, had fewer stores, less debt and a nice amount of cash on the books. Not to mention resurging sales, a growing international presence, along with a healthy amount of owned real estate.

Krispy Kreme was now a value stock, in my view, and an extremely valuable brand with a very low price. An initial position was taken in early 2010, in the $4.50 range. I was one of the few fools writing about it at the time, but that was not to last.

In April of that year, the Krispy Kreme reported breakeven results for fiscal 2010, a monumental event for a company that nearly went under. Since then, in just four years, the company has increased total stores 47% to 855, and franchised stores 52%. There are now 595 international stores, and that is where much of the growth is coming from.

As investors have re-embraced the story over the past four years, and as the company has re-entered the mainstream, the stock has been volatile especially at earnings releases. That's not uncommon. When a company turns around as remarkably as Krispy Kreme has, renewed attention can bring high expectations. When those expectations are not met, the stock will suffer.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
KKD $17.22 0.00%
AAPL $132.54 0.00%
FB $80.54 0.00%
GOOG $540.11 0.00%
TSLA $247.73 0.00%

Markets

DOW 18,232.02 -53.72 -0.29%
S&P 500 2,126.06 -4.76 -0.22%
NASDAQ 5,089.3620 -1.4320 -0.03%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs