Krispy Kreme Case Study
INTRODUCTION
The Krispy Kreme, Inc. case investigates the contributing factors that caused this particular darling of Wall Street’s stock to suddenly plummet more than 80% in 2004. In the year 2000, Krispy Kreme went to public and boasts iconic status by became the hottest brand in America. Less than a year after its initial public offering, the company’s shares were selling for 62 times earnings. However, in 2004 the market was shocked by the company’s stocks that plummeted more than 80% over the following 16 months.
For the first time in its history, Krispy Kreme made three major adverse results. First announcement is the company told investors to expect earnings to be 10% lower than anticipated, claiming that the recent low-carbohydrate diet trend in the United States had hurt the sales. Next, the company announced that they planned to divest Montana Mills and would take a charge of 35 million to 40 million in the first quarter. The third announcement is the company planned to close three of its new Hot Doughnut and Coffee Shops. These negative announcements have caused its shares closed down by 30%.
In this paper, we will investigate the key determinants that caused the dramatic decline in Krispy Kreme’s shares prices. This paper will be divided into 5 segments. The first segment, we will investigate on how the historical data of financial performance and financial position revealed the current financial health of Krispy Kreme Doughnuts, Inc. Next, the second segment offers the information on how the numerical benchmark or financial ratios extend our understanding on the interpretation of financial statements. In addition, this segment also provides some explanations of several questions that may arise from the given information in case Exhibits 7, 8 and 9.
Third segment will look at the financial health of Krispy Kreme by analysing the exhibit 7 and 8. We will analyse several financial ratios including liquidity
The Krispy Kreme, Inc. case investigates the contributing factors that caused this particular darling of Wall Street’s stock to suddenly plummet more than 80% in 2004. In the year 2000, Krispy Kreme went to public and boasts iconic status by became the hottest brand in America. Less than a year after its initial public offering, the company’s shares were selling for 62 times earnings. However, in 2004 the market was shocked by the company’s stocks that plummeted more than 80% over the following 16 months.
For the first time in its history, Krispy Kreme made three major adverse results. First announcement is the company told investors to expect earnings to be 10% lower than anticipated, claiming that the recent low-carbohydrate diet trend in the United States had hurt the sales. Next, the company announced that they planned to divest Montana Mills and would take a charge of 35 million to 40 million in the first quarter. The third announcement is the company planned to close three of its new Hot Doughnut and Coffee Shops. These negative announcements have caused its shares closed down by 30%.
In this paper, we will investigate the key determinants that caused the dramatic decline in Krispy Kreme’s shares prices. This paper will be divided into 5 segments. The first segment, we will investigate on how the historical data of financial performance and financial position revealed the current financial health of Krispy Kreme Doughnuts, Inc. Next, the second segment offers the information on how the numerical benchmark or financial ratios extend our understanding on the interpretation of financial statements. In addition, this segment also provides some explanations of several questions that may arise from the given information in case Exhibits 7, 8 and 9.
Third segment will look at the financial health of Krispy Kreme by analysing the exhibit 7 and 8. We will analyse several financial ratios including liquidity