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Krispy Kreme Narrows Loss

The doughnut change loses a penny a share in the third quarter.

Shares of

Krispy Kreme Doughnuts


burst 27.1% higher Thursday as the company continued to tighten its belt and posted its first narrowed quarterly loss for the fiscal year.

The Winston-Salem, N.C.-based doughnut chain reported a third-quarter shortfall of $798,000, or a penny a share, compared with a year-ago loss of $7.2 million, or 12 cents a share. This is also a vast sequential improvement, as its GAAP-based second quarter loss had come to 42 cents a share.

These most recent results took sharp benefit from a more-than-halved interest expense, which is thanks to a refinancing of its long-term debt earlier this year. Also embedded are a net credit to impairment charges and lease-termination costs of $268,000. Last year's financials included a charge of $5.4 million.

Analysts, whose estimates typically exclude one-time items, were looking for the company to break even, according to Thomson Financial.

Revenue slid 11.7% from a year ago to $103.4 million, coming in under two analysts' expectations for $107 million. Systemwide sales, which include the flat franchise revenue of $5.7 million, were down 2.6%.

Those franchises "have been experiencing financial pressures" lately, per a company press release. Some 25 stores were closed through the third quarter, and a "significant" amount of further closures are expected "in the foreseeable future." That directly affects sales at the company's KK Supply Chain, which makes the doughnut-making equipment that all factory stores are required to buy.

Indeed, Chief Executive Daryl Brewster admitted that "we still have much to do," but vaunted progress on the company's continuing turnaround. Among other developments, Krispy Kreme has closed five more underperforming stores and continues adding more satellite locations, which get their doughnuts from nearby factory locations rather than making them on premises.

Also noteworthy was a 48% year-on-year surge in international franchisee sales.

Krispy Kreme shares, which have been on a steady decline this year, on Thursday gained 69 cents to $3.24.