Krispy Kreme Doughnuts, Inc
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Krispy Kreme Doughnuts,Inc.
As the millennium began, the future for Krispy Kreme Doughnuts,Inc., smelled sweet.Not only could the company boast iconic statusand a nearly cultlike following. it had quickly become a darling of Wali Street.Less than a year after its initial public offering, in April 2000, Krispy Kreme shareswere selling for 62 times earnings and, by 2003, Fortune magazinehad dubbed the company "the hottestbrand in America." With ambitiousplans to open 500 doughnutshopsover the frrst half of the decade,the company 'sdistinctivegreen-and-red "Hot vintage logo and unmistakable Dor.rghnr-rts Now" neon sign had becomeubiquitous. At the end of 2004, however,the sweet story had begun to sour as the company made severalaccountingrevelations,after which its stock price sank. Frcm its peal. in August 2003, Krispy Kreme 's stock price plummeted more than 807c in the next l6 months.Investorsand analystsbegan asking probing questions aboLitthe con-ipany 's fundamentals, even by the beginningof 2005, many of those questions but remainedunanswered. Exhibits 1 and 2 provide Krispy Kreme 'sfinancialstatements for fiscal-years 2000 throLrgh 2004. Was this a healthy company?What had happened to the companythat some had thought woLrldbecomethe next Starbucks? almost If everyone loved the doughnuts.why were so many investorsfleeing the popLrlar doughnutmaker?
Company Background
Krispy Kreme beganas a single doughnutshop in Winston-Salem, North Carolina, rn 1937, when Vernon Rudolph, who had acquired the company 'sspecialdoughnut recipe from a French chef in New Orleans, started making anciselling doughnuts wholesaleto supermarkets. Within a short time, Rudolph 's productsbecame so popular that he cut a hole in his factory 's wall to sell directly to customersthus was born the central Krispy Kreme retail concept: the factory store. By the late 1950s,Krispy Kreme had 29 shopsin 12 states,many of which
) j
I
1 '
7
I
I
I l-*--*** I I ___i
Krispy Kreme Doughnuts,Inc.
As the millennium began, the future for Krispy Kreme Doughnuts,Inc., smelled sweet.Not only could the company boast iconic statusand a nearly cultlike following. it had quickly become a darling of Wali Street.Less than a year after its initial public offering, in April 2000, Krispy Kreme shareswere selling for 62 times earnings and, by 2003, Fortune magazinehad dubbed the company "the hottestbrand in America." With ambitiousplans to open 500 doughnutshopsover the frrst half of the decade,the company 'sdistinctivegreen-and-red "Hot vintage logo and unmistakable Dor.rghnr-rts Now" neon sign had becomeubiquitous. At the end of 2004, however,the sweet story had begun to sour as the company made severalaccountingrevelations,after which its stock price sank. Frcm its peal. in August 2003, Krispy Kreme 's stock price plummeted more than 807c in the next l6 months.Investorsand analystsbegan asking probing questions aboLitthe con-ipany 's fundamentals, even by the beginningof 2005, many of those questions but remainedunanswered. Exhibits 1 and 2 provide Krispy Kreme 'sfinancialstatements for fiscal-years 2000 throLrgh 2004. Was this a healthy company?What had happened to the companythat some had thought woLrldbecomethe next Starbucks? almost If everyone loved the doughnuts.why were so many investorsfleeing the popLrlar doughnutmaker?
Company Background
Krispy Kreme beganas a single doughnutshop in Winston-Salem, North Carolina, rn 1937, when Vernon Rudolph, who had acquired the company 'sspecialdoughnut recipe from a French chef in New Orleans, started making anciselling doughnuts wholesaleto supermarkets. Within a short time, Rudolph 's productsbecame so popular that he cut a hole in his factory 's wall to sell directly to customersthus was born the central Krispy Kreme retail concept: the factory store. By the late 1950s,Krispy Kreme had 29 shopsin 12 states,many of which