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Overglazing Krispy Kreme's News

Some media outstripped the promotional efforts of the firm.

Exalted, his importance magnified by being ranked the No. 1 business journalism critic in the nation by both the Maven's Mom survey and the Talking Biz Web site, The Business Press Maven will only descend from his perch for a hair-pulling, shin-kicking street fight in one circumstance: when someone dares to defy common decency by screwing up reporting about doughnuts.

This is not even a misjudgment made about a significant company. But as a journalist, I would rather be torn apart by wolves than bury a lead about doughnuts. And for you, the savvy investor, the mistake stands as a perfect example of how easy it is to elicit unduly, prematurely favorable coverage for even the most troubled company. Just send a nonspecific press release across the wire and nonspecific-but-favorable coverage (perhaps more favorable than even the press release) is sure to follow.

While The Business Press Maven was busy putting

Countrywide's

(CFC)

Angelo Mozilo

out of investors' misery on Friday,

Krispy Kreme Doughnuts

(KKD)

came ambling along with a press release.

Recall that Krispy Kreme rode its Homer Price doughnut machines to high-flying status in the stock market before proving the

Godfather

more accurate than Peter Lynch when it comes to investing.

Peter Lynch was famous for saying that investors should follow their personal taste and those of their families. But, though I loved Krispy Kreme's product, as did my family, every aspect of the company's operation meant you were better off to heed Clemenza more than Lynch and: "Leave the stock. Take the doughnut."

With this as a backdrop, the company issued a boilerplate press release on Friday. Its headline: "Krispy Kreme to Realign Its Franchise and Company Stores Operations." Some executives were in, some were out. Same old, same old. The company even wound up citing the CEO, Daryl Brewster, for this typically vapid quote buried down at the bottom, a fittingly modest gesture: "These changes will result in a more responsive, leaner and focused field structure that we expect will help us drive same-store sales, improve unit economics and reduce system costs."

And then what happens? May I choke to a violent death on a glazed cruller.

Reuters

runs with a headline, no less than 20 minutes later: "Krispy Kreme realigns operations." I guess it took them a full 20 minutes to edit down Krispy Kreme's slightly longer headline. But it gets worse. Much worse.

Remember that throwaway line (completely lacking in backup facts) about how this reshuffling of the executive deck (once again) will magically drive sales? Even the press release author was not shameless enough to put that up high. But

Reuters

? Right in the lead!

"Krispy Kreme Doughnuts Inc (NYSE:KKD - News) said on Friday that it is realigning its franchise and company store operations, a move that should help the company improve sales at existing locations and cut costs."

Is this latest crowd in charge of Krispy introducing a doughnut that will cure everything from cancer to narcolepsy? Not a word. They just take the company at its word -- word that was buried in a press release -- that this will improve sales. The business media -- may God smite it -- was more promotional than even a press release!

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How did

The Associated Press

do? They worked a bit harder I guess, since it took them until after the close ... to come out with almost precisely the same thing.

Headline: the exact same! "

Krispy Kreme Realigns Operations. Worse, again, that throwaway claim about increased sales goes from the bottom of the press release to the top of the article:

"Krispy Kreme Doughnuts Inc. shuffled executive slots and said Friday it would realign its franchise and company store operations, a move that should help the embattled doughnut maker improve sales and cut costs."

From a business perspective, I don't even see why media outlets, troubled to begin with, waste time and manpower rewriting press releases. But when they rewrite them with a more promotional flair than even the companies' media relations flaks?!

Where is that glazed cruller? Forget my exalted status in life. I can't take it anymore.

Home Depot's Shrinkage Problem

I want to go from doughnuts, which fall right to The Business Press Maven's hips, to the subject of shrinkage. Not the kind that stands as a synonym for in-store theft and not the sort made famous on

Seinfeld

. I'm talking about what happened to the price of

Home Depot's

(HD) - Get Home Depot, Inc. (HD) Report

supply unit. The company was forced to lower the sale price of its troubled commercial supply business by some $2 billion. (I hate when that happens.)

There are two ways this is being reported -- the wrong way and mine.

In some quarters, it is framed as a perfect metaphor for how limits on credit have wreaked havoc on pending buyout deals. Only half right. Look at how

The New York Times

puts this in deeper perspective way up high in its take on the issue, by pointing out, as some others did not, that this deal was doubly cursed. It was a buyout deal amid a credit crunch, but it was also a housing-based deal:

"Still, this deal is different in that the fortunes of Home Depot Supply, as the division is called, are tied closely to the housing market, which has also been weakening."

By the way, even if your kids like the taste of drywall, don't be tempted to buy Home Depot stock.

At the time of publication, Fuchs had no positions in any of the stocks mentioned in this column.

A journalist with a background on Wall Street, Marek Fuchs has written the County Lines column for The New York Times for the past five years. He also contributes regular breaking news and feature stories to many of the paper's other sections, including Metro, National and Sports. Fuchs was the editor-in-chief of Fertilemind.net, a financial Web site twice named "Best of the Web" by Forbes Magazine. He was also a stockbroker with Shearson Lehman Brothers in Manhattan and a money manager. He is currently writing a chapter for a book coming out in early 2007 on a really embarrassing subject. He lives in a loud house with three children. Fuchs appreciates your feedback;

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to send him an email.