Man, I just checked their stock-from a high of $43/share, the stock has slid to $5.00! How did this company fall from grace so fast?Its rumored that a lot of KK franchises willbe closing upsoon…and a lot of the corporate staff is about to get their “golden parachutes”.
A sad time in the doughnut world! But it looks like insiders knew what was happenening…there was a huge wave of insider selling (when the stocjk was around $25.00/share). Could these guys be prosecuted? :smack:
From the Jan. 5, 2005 article “Investors left in a glaze with Krispy Kreme restatement” in the Chicago Tribune, it looks like there was a significant accounting error followed by an October SEC investigation.
From the Jan. 19, 2005 Wall Street Journal article “Once-Hot Krispy Kreme Ousts Its CEO Amid Accounting Woes” a new executive blames the financial problems on “revenue shortfalls and on “explosive growth” that had outstripped the company’s support structures.”
In WAG territory, I heard that the Atkins diet damaged their sales last year too.
IMO it was just a fad, and fads end up in yardsales eventually (remember bellbottom pants?). I mean, a doughnut’s a doughnut. As for the OP, sure they can be prosecuted. Proving insider trading is tough, though.
Not so! You can make an amazing gallimaufry of donuts, from light yeasty glazed wonders to heavy, choking cakes. There’s an almost endless variety all over the world.
Plus, their topology is interesting. 
I’m going to say, disregarding any corporate sleazery, that the two big factors were these:
First, yah, it was a fad. Everyone had to try Krispy Kremes because, well, everyone else was trying them. Since Dunkin’ Donuts is so entrenched, and because it serves non-donut items, I suspect that people continued to use it for their daily pick-me-up routines.
Second, Atkins. The big growth in Krispy Kreme came right before Atkins/low-carb diets became very popular. If you’re avoiding carbs, a sugar-glazed donut is about the WORST possible food to eat.
Combine these two, and thats about all you need to do it. Shame if they close, since I think its one of the best-run chain businesses I’ve been to (in terms of the stores themselves, that is). 'Course, it’s not like I myself ever went there all that often – a sugary donut is an occasional thing. Plus, how many can eat more than one or two of those at a sitting?
Even before the shady dealings in the Yahoo link, KK was the victim of horrendously bad timing. They had just gone through a huge expansion when the low-carbohydrate Atkins craze hit. They had stores everywhere, and nobody wanted doughnuts. They’d drive past the Krispy Kreme store, and buy a big bag of Fried Pork Rinds. :rolleyes:
The expansion of the chain caused fad behavior in the new markets, but Krispy Kreme’s been around the south forever. But the faddishness in the new markets made for the pump and crash. (Just like the sugar highs)
I’ve been known to eat more than a few. 
Sorry, but I believe this link requires a registration. But in short…
Krispy Kreme went into a program of very fast expansion. When it became obvious that some of those franchises were not performing stellarly, Krispy Kreme bailed them out, rather then letting them sink. Bailed them out to the tune of $32mill.