Shares of Krispy Kreme Surge on Narrower Loss

Shares of Krispy Kreme Doughnuts (KKD) spiked more than 25% Thursday after the company posted a narrower loss than expected on lower interest expenses. The company's Q3 net loss shrank to $798,000 ($0.01) compared to a loss of $7.2 million ($0.12/share) last year. Revenue fell 11.7% to $103.4 million. Analysts were expecting a loss of $0.02/share on $107 million in revenue. Interest expenses fell to $2.3 million from $5.2 million last year. Commenting on the future of Krispy Kreme, CEO Daryl Brewster said, "We continue to focus on improving the company shop performance, driving the hub and spoke model, growing our international franchise business, refranchising certain domestic markets and reducing costs to help offset rising commodity price." The donut chain said a number of franchisees had been struggling, and it expects them to close a significant amount of stores in the future. Investors saw this as a sign the company would continue to cut costs and weed out unprofitable shops. "It's just very cheap, and someone is willing to make a bet that it has bottomed and that it can be fixed," said Malcolm Knapp, a New York-based restaurant consultant, about the company. "When you eliminate a lot of stuff, you're going to cut costs." Shares closed up 27.1% to $3.24.

Sources: Press release, Bloomberg, RTT News
Competitors: SBUX, THI

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