...Krispy Kreme Doughnuts Going Global? The American doughnut was born in 1847, so the lore goes, when a Maine seaman urged his mother to shove a fork through the center of her "fried cakes." That solved the problem of the cakes' soggy middle and created the doughnut's trademark hole. Today, perhaps the most celebrated of the sweet treats are those fried up by Krispy Kreme Doughnuts Inc., whose hot "original glazed" doughnuts have earned a cult-like following. With virtually no advertising, but an uncanny knack for creating free publicity through the media, the company keeps racking up double-digit gains in sales and profit. Skeptics keep trying to poke holes in the Krispy Kreme mystique-questioning whether the company can maintain its remarkable growth. Some analysts believe its growth rates already are beginning to ease. They also contend that the company's stock remains too rich for most tastes. Their argument appears to hold some water. Krispy Kreme's stock, after skyrocketing at first, trades for less than it did two years ago despite the company's consistent growth record. But the company is unmoved by the pessimists and has no intention of scaling back its aggressive expansion plans, which include Southern California. "We may be in the first or second inning of our market penetration opportunities around the world, including the United States," said Scott Livengood, Krispy Kreme's chairman and chief executive. With 288 stores in 38 states and Canada, Krispy Kreme...
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...Case Analysis Krispy Kreme Doughnuts, Inc. Thadavillil (Nathan) Jithendranathan Professor of Finance Opus College of Business University of St. Thomas St. Paul, Minnesota, U.S.A. Context This case considers the sudden and very large drop in the market value of equity for Krispy Kreme Doughnuts, Inc., associated with a series of announcements made in 2004. Those announcements caused investors to revise their expectations about the future growth of Krispy Kreme, which had been one of the most rapidly growing American corporations in the new millennium. Objective • To gradually gain back analysts’, investors’ and lenders’ confidence in the company in the succeeding months. • To increase sales and profitability in terms of its core business, which is selling doughnuts. • To increase stock price to the previous levels and thereby increase shareholder value. Objectives (continued) • To correct inaccurate entries in the financial statements and to present a clean and unbiased report. • To extend further reach to consumers strategically to achieve significant growth in the next five years. • To implement extensive marketing measures for its brand and products and investment strategy for both on and off premise operations. Background • Fortune magazine had dubbed Krispy Kreme Doughnut, Inc. “the hottest brand in America,” with ambitious plans to open 500 doughnut shops over the first half of the decade. • The company generated revenues...
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...Krispy Kreme Case Study: Adapting to the Changing Needs of Consumers By: Andrea Slonecker, Jessica Curtin, Mike Hurlbut, & Keith Anderson Table of Contents Executive Summary............................................................................................................................ 1 Introduction ...................................................................................................................................... 2 Company History ....................................................................................................................................... 2 Current Situation ....................................................................................................................................... 4 External Environment Analysis ........................................................................................................... 6 General Environment ................................................................................................................................ 6 Industry Environment ............................................................................................................................. 10 Competitive Environment ....................................................................................................................... 12 Internal Environment Analysis .......................................................................................................... 17 Peformance...
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...inefficiency in the management of Krispy Kreme Doughnuts, Inc. in terms of its operations, marketing, accounting, and investment planning. III. OBJECTIVES a. To gradually gain back analysts’, investors’ and lenders’ confidence in the company in the succeeding months. b. To increase sales and profitability in terms of its core business, selling of doughnuts. c. To regain and increase stock price therefore increasing shareholder value. d. To correct inaccurate entries in the financial statements of KKD and to present a clean and unbiased reports. e. To extend further reach to consumers strategically to achieve significant growth in the next five years. f. To implement extensive marketing measures for its brand and products and investment strategy for both on and off premise operations. IV. AREAS OF CONSIDERATION • Fortune magazine had dubbed Krispy Kreme Doughnut, Inc. “the hottest brand in America.” With ambitious plans to open 500 doughnut shops over the first half of the decade. • The company generated revenues through four primary sources: on-premise retail sales at company owned stores (27% of revenues), off-premises sales to grocery and convenience stores (40%); manufacturing and distribution of product mix and machinery (29%); and franchise royalties and fees (4%). • Roughly 60% of sales at a Krispy Kreme store were derived from the company’s signature product, the glazed doughnut. • On May 7, 2004, Krispy Kreme announced adverse results. The...
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...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...
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...There is inefficiency in the management of Krispy Kreme Doughnuts, Inc. in terms of its operations, marketing, accounting, and investment planning. III. OBJECTIVES a. To gradually gain back analysts’, investors’ and lenders’ confidence in the company in the succeeding months. b. To increase sales and profitability in terms of its core business, selling of doughnuts. c. To regain and increase stock price therefore increasing shareholder value. d. To correct inaccurate entries in the financial statements of KKD and to present a clean and unbiased reports. e. To extend further reach to consumers strategically to achieve significant growth in the next five years. f. To implement extensive marketing measures for its brand and products and investment strategy for both on and off premise operations. IV. AREAS OF CONSIDERATION • Fortune magazine had dubbed Krispy Kreme Doughnut, Inc. “the hottest brand in America.” With ambitious plans to open 500 doughnut shops over the first half of the decade. • The company generated revenues through four primary sources: on-premise retail sales at company owned stores (27% of revenues), off-premises sales to grocery and convenience stores (40%); manufacturing and distribution of product mix and machinery (29%); and franchise royalties and fees (4%). • Roughly 60% of sales at a Krispy Kreme store were derived from the company’s signature product, the glazed doughnut. • On May 7, 2004, Krispy Kreme announced adverse results. The company told...
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...Krispy Kreme Doughnuts Going Global? The American doughnut was born in 1847, so the lore goes, when a Maine seaman urged his mother to shove a fork through the center of her "fried cakes." That solved the problem of the cakes' soggy middle and created the doughnut's trademark hole. Today, perhaps the most celebrated of the sweet treats are those fried up by Krispy Kreme Doughnuts Inc., whose hot "original glazed" doughnuts have earned a cult-like following. With virtually no advertising, but an uncanny knack for creating free publicity through the media, the company keeps racking up double-digit gains in sales and profit. Skeptics keep trying to poke holes in the Krispy Kreme mystique-questioning whether the company can maintain its remarkable growth. Some analysts believe its growth rates already are beginning to ease. They also contend that the company's stock remains too rich for most tastes. Their argument appears to hold some water. Krispy Kreme's stock, after skyrocketing at first, trades for less than it did two years ago despite the company's consistent growth record. But the company is unmoved by the pessimists and has no intention of scaling back its aggressive expansion plans, which include Southern California. "We may be in the first or second inning of our market penetration opportunities around the world, including the United States," said Scott Livengood, Krispy Kreme's chairman and chief executive. With 288 stores in 38 states and Canada, Krispy Kreme...
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...case teaching note | 14 Krispy Kreme Doughnuts, Inc. Overview With 181 Krispy Kreme stores in 28 states, Krispy Kreme Doughnuts in 2001 was rapidly building something of a cult following for its light, warm, melt-in-your-mouth doughnuts. Sales were on an impressive climb, exceeding 3.5 million doughnuts a day. The company’s business model called for 20 percent annual revenue growth, mid-single digit comparable store sales growth, and 25 percent annual growth in earnings per share. Krispy Kreme had created a flurry of excitement with its expansion into metropolitan markets outside the Southeast—its grand openings in newly entered markets attracted long lines of customers and created traffic jams around its store sites. The first new store in San Diego racked up $365,000 in sales the first week, with 5 TV crews covering the opening day event. The first store in Denver produced first-week revenues of $369,000, drew 50,000 visitors, and had $1,000,000 in sales the first 22 days; the crowds were so large that three off-duty deputy sheriffs were hired to direct traffic from 5 a.m. to 11 p.m. during the Tuesday-Saturday period of grand opening week—one night there were 150 cars in line at the drive-thru window at 1:30 a.m. But despite the enthusiastic reception that Krispy Kreme stores were getting, a number of securities analysts were dubious whether the company’s strategy and growth potential merited a stock price nearly 70 times projected 2002 earnings...
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...This case is designed to enhance your understanding of building forecasted financial statements, by examining a company’s business model and strategy to estimate future performance. The case provides forecasts made by financial analysts at CIBC, which will be used to identify and evaluate the assumptions underlying these earnings forecasts. 1. Analysts are predicting that Krispy Kreme will be able to perform highly effectively and continue to grow rapidly in the coming two years. Do you agree with their analysis? If so, why? If not, why not? 2. What factors did the CIBC analysts examine to forecast sales growth for KKD in the years ended January 2003 and 2004? What assumptions did they implicitly make about the number of new stores and weekly sales per store (for both company and franchise stores)? What are their implicit assumptions about revenue growth from franchise operations and KK manufacturing and distribution? Do you agree with these forecasts? If so, why? If not, why not? 3. What are the NOPAT margins that the CIBC analysts have forecasted for KKD for the years ended January 2003 and 2004? What assumptions were made about specific expense items (e.g., margins, general and administrative, depreciation and amortization, taxes)? Do you agree with these forecasts? If so, why? If not, why not? 4. The CIBC analysts do not forecast KKD’s balance sheet for the following year (ended January 2003). Make you own balance sheet forecasts*. 5. In general, do...
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...Case Study: Krispy Kreme Doughnuts, Inc. Case Study: Krispy Kreme Doughnuts, Inc. Problem The problem in this case deals with the loss in value of Krispy Kreme Doughnuts’ stock. Was the main reason for the fall in stock price due to article posted in the Wall Street Journal about the SEC investigation? Were there deeper issues within the company that caused the loss in earnings per share? Analysis In April of 2000, the CEO of Krispy Kreme Doughnuts took the company public and had one of the largest IPO’s in recent years. After Krispy Kreme went public, they stated that they were planning to expand from 144 to 500 stores over the next five years. The company grew rapidly for the next few years, and stock prices rose well above the S&P 500. On May 7, 2004 the company reported adverse results and told investors to expect earnings to be 10% lower than originally anticipated. Krispy Kreme’s reasoning for the decrease in expected earning was the growing trend in America toward a low-carbohydrate diet. On May 25, 2004 the Wall Street Journal published an article on the aggressive accounting treatment used by Krispy Kreme during a franchise acquisition. A franchisee owning seven stores in Michigan owed the company several millions of dollars. They asked him to close two underperforming stores and pay Krispy Kreme accrued interest on past-due loans. In return, the franchisor promised to raise the purchase price of the franchise. Krispy Kreme accountants recorded the interest...
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...Case Study: Krispy Kreme Doughnuts, Inc. Problem The problem in this case deals with the loss in value of Krispy Kreme Doughnuts’ stock. Was the main reason for the fall in stock price due to article posted in the Wall Street Journal about the SEC investigation? Were there deeper issues within the company that caused the loss in earnings per share? Analysis In April of 2000, the CEO of Krispy Kreme Doughnuts took the company public and had one of the largest IPO’s in recent years. After Krispy Kreme went public, they stated that they were planning to expand from 144 to 500 stores over the next five years. The company grew rapidly for the next few years, and stock prices rose well above the S&P 500. On May 7, 2004 the company reported adverse results and told investors to expect earnings to be 10% lower than originally anticipated. Krispy Kreme’s reasoning for the decrease in expected earning was the growing trend in America toward a low-carbohydrate diet. On May 25, 2004 the Wall Street Journal published an article on the aggressive accounting treatment used by Krispy Kreme during a franchise acquisition. A franchisee owning seven stores in Michigan owed the company several millions of dollars. They asked him to close two underperforming stores and pay Krispy Kreme accrued interest on past-due loans. In return, the franchisor promised to raise the purchase price of the franchise. Krispy Kreme accountants recorded the interest paid as interest income resulting in...
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...Krispy Kreme Doughnuts, Inc. I. POINT OF VIEW This case is analyzed from the point of view of a third party consultant. II. PROBLEM There is inefficiency in the management of Krispy Kreme Doughnuts, Inc. in terms of its operations, marketing, accounting, and investment planning. III. OBJECTIVES a. To gradually gain back analysts’, investors’ and lenders’ confidence in the company in the succeeding months. b. To increase sales and profitability in terms of its core business, selling of doughnuts. c. To regain and increase stock price therefore increasing shareholder value. d. To correct inaccurate entries in the financial statements of KKD and to present a clean and unbiased reports. e. To extend further reach to consumers strategically to achieve significant growth in the next five years. f. To implement extensive marketing measures for its brand and products and investment strategy for both on and off premise operations. IV. AREAS OF CONSIDERATION • Fortune magazine had dubbed Krispy Kreme Doughnut, Inc. “the hottest brand in America.” With ambitious plans to open 500 doughnut shops over the first half of the decade. • The company generated revenues through four primary sources: on-premise retail sales at company owned stores (27% of revenues), off-premises sales to grocery and convenience stores (40%); manufacturing and distribution of product mix and machinery (29%); and franchise royalties and fees (4%). • Roughly 60% of sales at a Krispy Kreme store were...
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...Companies today are combining in record numbers. Executives pursue mergers, acquisitions, and joint ventures as a means to create value by (1) acquiring technologies, products, and market access, (2) creating economies of scale, and (3) establishing global brand presence. There is an underlying belief that most markets can provide revenues to three large suppliers; when more than three exist the urge to merge is irresistible. That said, the business world seems littered with integrated companies that have lost value for shareholders. The question that inevitably arises is: "What forces are powerful enough to counteract the value-creating energy of economies of scale or global market presence?" Culture has emerged as one of the dominant barriers to effective integrations. In one study, culture was found to be the cause of 30 percent of failed integrations.1 Companies with different cultures find it difficult, if not often impossible, to make decisions quickly and correctly or to operate effectively. What is "culture"? Culture consists of the long-standing, largely implicit shared values, beliefs, and assumptions that influence behavior, attitudes, and meaning in a company (or society). This definition has several important implications: Culture is implicit. People who share in a culture find their culture challenging to recognize. The most insightful cultural observers often are outsiders, because cultural givens are not implicit to them. Culture influences how people behave...
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...Forecast Krispy Kreme Doughnuts, Inc periode 2003-2004 oleh CIBC World Markets Krispy Kreme Doughnuts, Inc adalah perusahaan donat dan kedai kopi global Amerika yang berbasis di Winston-Salem, North Carolina. Pendiri Krispy Kreme, Vernon Rudolph dan pamannya membeli toko donat Joseph LeBeouf di Broad Street di Paducah, Kentucky bersama dengan resep rahasia untuk donat ragi diperoleh dari Chef Perancis di New Orleans. Rudolph mulai menjual donat ragi di Paducah dan mengirimkan donat itu dengan sepedanya. Operasi itu pindah ke Nashville, Tennessee dan anggota keluarga lainnya bergabung untuk memenuhi permintaan pelanggan. Rudolph menjual minat di toko Nashville pada tahun 1937 dan membuka toko donat di Winston-Salem, North Carolina menjual donat ke toko dan kemudian langsung ke pelanggan individu. Toko pertama di North Carolina terletak di sebuah gedung sewaan di South Main Street di Winston Salem dalam apa yang sekarang disebut bersejarah Old Salem. The Krispy Kreme logo dirancang oleh Benny Dinkins, arsitek lokal. Ekspansi terjadi pada 1950-an, termasuk sebuah toko awal di Savannah, Georgia. Pada tahun 1960, Krispy Kreme dikenal di seluruh daerah Amerika Tenggara, dan mulai ekspansi ke daerah Amerika lainnya. Pada tahun 1976, Krispy Kreme Doughnut Corporation menjadi anak perusahaan yang sepenuhnya dimiliki oleh Beatrice Foods of Chicago, Illinois. Pertengahan tahun 1990 Krispy Kreme tumbuh secara geografis melalui franchise. Produk yang dijual di Krispy Kreme store, toko...
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... Ethics-Krispy Kreme Introduction The purpose of this case study is to analyze the accounting scandal at Krispy Kreme. "The Krispy Kreme story is one of a newly public company, experiencing rapid growth, that failed to meet its accounting and financial reporting obligations to its shareholders and the public,"(as cited in Maremont & Brooks, 2005). The senior managers were the ones who profited from this accounting scandal and the shareholders and the public suffered as a result. There are several prevention methods that can be taken to prevent this from occurring in the future. It will benefit Krispy Kreme to hire internal auditors who can report to management any regulations. Analysis Company Overview Krispy Kreme opened its first store July 13, 1937 in Winston-Salem, NC (Krispy Kreme). According to the Krispy Kreme website, “Vernon Rudolph bought a secret yeast-raised doughnut recipe from a New Orleans French chef, rented a building in what is now historic Old Salem in Winston-Salem, NC, and began selling Krispy Kreme doughnuts to local grocery stores”(Krispy Kreme). Krispy Kreme donuts can be found at many grocery stores with sixty personal stores around the United States. Krispy Kreme offers a fundraiser program for schools and churches. Krispy Kreme has expanded its business internationally “celebrating the 100th shop in Mexico” in 2013 (Krispy Kreme). Accounting Scandal “Former executives at Krispy Kreme Doughnuts Inc. who oversaw...
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