The scope of this report is to analyze Krispy Kreme Dounghnuts’ (KKD) financial statements, supported exhibits, and business plan to evaluate the impact of earnings analysis announcements on the stock price for 2003-2004.
KRISPY KREME’S COMPANY BACKGROUND
In 1937, KKD began as a single doughnut shop in North Carolina, selling doughnuts wholesale to supermarkets. The popularity of the product not only caused KKD to become a factory-like retail store but also led to the franchise of more stores to mostly franchisees. It was later purchased by Beatrice Foods, in 1973, who expanded it to 100 locations. Beatrice Foods also “introduced other products such as soups, sandwiches, and cut costs by changing the appearance of stores and substituting cheaper ingredients”. The business however did not flourish as expected, and was sold to a group of franchisees led by Joseph McAleer in 1982 for $24 million. McAller led the KKD back to using the original doughnut formula and the company’s traditional logo; in addition McAller introduce the “HOT DOUGHNUTS NOW” sign, which successfully told customers when fresh doughnuts were coming off the line. KKD continued to struggle but did expand slowly and became debt free in 1989. In 1998, Scott Livengood became CEO of KKD and took the company public on April 2000, and on the next day of public offering the company share price was $40.63, “giving the firm a market capitalization of nearly $500 million”. KKD generated revenues through four primary sources: retail stores, franchisee stores, off-premises sales to grocery and convenience stores and gas stations, and by manufacturing and distribution of machinery and product mix.
FINANCIAL RATIO ANAYLSIS
In order to understand KKD’s financial standing, it is a good ideal to compare its financial ratios to the industry average. The industry average ratios will be compromised of similar quick service restaurants, as stated in Exhibit #8, excluding KKD’s values.... [continues]
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