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Krispy Kreme Posts Loss, Blames Low-Carb Trend

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From Associated Press

Krispy Kreme Doughnuts Inc. on Tuesday reported its first quarterly loss since going public in 2000, blaming the low-carb diet trend for the slump.

Chief Executive Scott Livengood remained adamant that carb-counting consumers, rather than rapid expansion, was the culprit.

“In 30 years in this business, I have never ever seen anything that rivals what has occurred over the last three months,” he told analysts, dismissing claims Krispy Kreme was using the diet theory to cover its mistakes.

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The Winston-Salem, N.C.-based company said it lost $24.4 million, or 38 cents a share, in its first quarter after taking a charge for shutting down its Montana Mills Bread Co. chain -- which it plans to sell -- and other restructuring costs.

Krispy Kreme, which has seen its share price plummet 37% since warning on May 7 that the surging popularity of low-carb diets had hurt its sales, also scaled back its expansion plans for the year. It now forecasts opening about 100 new stores systemwide, about 20 fewer than previously planned.

Krispy Kreme earned $13.1 million, or 22 cents a share, in the same quarter last year.

Excluding the nonrecurring charges, earnings were 23 cents a share, which matched the average analyst estimate compiled by research firm Thomson First Call.

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Total sales rose 24% to $184.4 million and same-store sales, a key measure of retail health, increased 4%. Sales at company-owned stores rose 5.2%.

Shares of Krispy Kreme rose 3 cents to $19.88 on the New York Stock Exchange.

During a conference call to analysts, Livengood was asked whether the low-fat diet trend in the early 1990s also hurt Krispy Kreme’s bottom line.

Not even close, he said.

“This is not an excuse. It’s what it is,” Livengood said. “What is important now is what we are going to do about it. We are taking it extremely seriously.”

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Company executives pointed to the new competition from low-carb products, particularly in supermarket aisles, where dozens of items are advertised as being low in carbohydrates.

During the call, the executives said Krispy Kreme was planning to market several new products, including a sugar-free doughnut and a new line of frozen drinks. The company also is testing a chocolate-flavored glazed doughnut, doughnut holes and mini doughnut rings.

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