Krispy Kreme: No Sugar Coating Dismal Earnings News

Krispy Kreme (KKD) is down 38% at below $4 for what may be the first time ever on terrible earnings news and the company's concession that its turnaround isn't going as planned.

Especially troubling is the company's concession that for the first six months six months of the year it wasn't in compliance with EBITDA covenants of its lending agreements -- not good when cash and cash flow are going down, as has been the case at Krispy Kreme.

This is the same company whose stock got a boost into the teens earlier this year after an analyst prematurely tried to juice the stock on his belief that shares would soar when the company filed long-delayed financials with the SEC. His comments alone caused the stock to rise. But the proof is always in the numbers, which suggest such gimmicks as a whole wheat doughnut aren't going to save the day.

As longtime readers of this blog (and my columns) know, that many of the new ideas being chatted up by new management of Krispy Kreme, including convenience stores, small stores and international growth, have already been tried, with little success, before.

There are those who believe the company needs to start from scratch with a new structure away from the public (as in stock) eye. If Krispy Kreme keeps violating loan covenants, that may not be as far-fetched as it sounds.