Krispy Kreme Says It Will Cut Jobs, Need New Funding

Krispy Kreme Doughnuts Inc. said Tuesday that it was slashing 25% of its staff outside retail locations and needed to secure new funding by the end of March.

Krispy Kreme shares fell 3% after the announcement. The former Wall Street darling’s stock has lost about 77% of its value in the last year.

Last month, Krispy Kreme averted defaulting on a $150-million credit facility after its lenders agreed to give it until March 25 to prepare its financial statements.

By that time, Krispy Kreme will need additional credit, the company said Tuesday. But it said there could be no assurance it would reach an agreement with its banks or that it would secure such funding.

The Winston-Salem, N.C., company is in the process of restating its 2004 financials because of errors in the way it accounted for repurchases of franchises. It therefore has been unable to file its most recent results with the Securities and Exchange Commission.

Krispy Kreme, suffering from sluggish sales of its signature doughnuts, said it was cutting 25% of the jobs in its corporate, mix plant, equipment manufacturing and distribution facilities to save $7.4 million a year.

A Krispy Kreme spokeswoman was not available to say how many employees would be affected by the job cuts. In a regulatory filing last year, Krispy Kreme said it had 554 employees in administrative offices and manufacturing and distribution facilities.

The staff cut will result in a restructuring charge of $600,000 in the firm’s fiscal first quarter.

Krispy Kreme also said it recently sold a corporate airplane, a move that will save about $3 million a year.

Krispy Kreme shares were unchanged at $7.94 on the New York Stock Exchange. After the announcement, the shares fell to $7.70 in after-hours trading.