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Krispy Kreme adapting to consumers' changing needs, chairman says
Journal photo by Jennifer Rotenizer
James Morgan, chairman, CEO and president of Krispy Kreme.
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Published: June 17, 2008
Updated: 06/17/2008 12:27 pm
Krispy Kreme Doughnuts Inc. is committed to a transforming recipe with more substance than style, and more reality checks than hoopla, its chairman and chief executive said today.
James Morgan cautioned against "over optimism" at the annual shareholders meeting, which came eight days after the company reported its first profitable quarter in 3½ years. He said that there likely will be some "unevenness" in quarterly performances for up to two years.
But Morgan said he is convinced that the company will be able to post consistent growth through increased international sales, including in high pedestrian sites such as train stations and airports.
There also will be an increased emphasis on snack products in kiosks at convenience and grocery stores, as well as small satellite stores, including two planned for the Triad, that will open by year's end.
"There is no shortage of challenges ahead of us," Morgan said to about 150 employees and shareholders and their family members.
Over the past four years, Krispy Kreme has struggled to adapt to the changing tastes of U.S. consumers.
The company is still being investigated by federal authorities about past accounting practices. In January, Krispy Kreme replaced Daryl Brewster, its president and chief executive, with Morgan. And higher raw-material and gas prices are having an influence on the company and its franchisees.
"But we believe we have even more opportunities, and we will meet those challenges head-on and overcome them," Morgan said.
Analysts have said that it is unlikely Krispy Kreme will ever approach its performance in the days before its financial woes. In August 2003, Krispy Kreme, the darling of Wall Street, was trading at more than $49 a share, because investors were buying into the hot-now hype. By contrast, its current 52-week high is $9.50 on June 29, 2007.
But investors and analysts appear to be gaining more confidence in the company with Morgan at the helm and the international franchise push.
The share price has more doubled than since Morgan took over — jumping from $2.32 a share on Jan. 15 to $4.74 as of 11:30 a.m.today.
"It's been a slow-baked process, but Krispy Kreme Doughnuts continues to awaken from its sugar coma," said Ryan Fuhrmann, an investment analyst and writer for The Motley Fool.
"Its malady stemmed largely from its own overindulgences in store expansion, along with its troublesome relations with franchisees. But judging from the first-quarter results, the latest management team has a firm grasp on how to get Krispy Kreme back on the path toward consistently positive financial performance ,'' he said. "Krispy Kreme still has work to do in convincing investors that it's firmly on the sweet path to consistency. Total sales still fell 6.6 percent in the first quarter as international growth failed to offset continued challenges here at home."
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