KKD - Sector: Services---Industry: Restaurants

[setravis]

New International Strategy Results in Earnings Surprise.......

Thursday's session revolved around President Bush's speech
regarding a 5 year interest rate freeze on subprime loans with
distinct characteristics to thwart many that are at risk of foreclosure.
The decision is one that will bring increased debate about
morals and the bailing out of some who should have never been
able to afford homes originally without the adjustable rate mortgages.
The President and Secretary Paulson noted that the freeze will stave
off foreclosures which would cause increased loss of value from investors and
homeowners alike. Either way, the government is trying to do something, which is commendable
and should boost market confidence, but the moral dilemma will continue as will debates about
government intervention into private industry.
While the government attempts to turnaround the mortgage and lending problems, another small
cap name saw increased attention due to their turnaround.
Krispy Kreme Doughnuts, Inc. (KKD) announced their third quarter results on Thursday. The
Company reported revenues decreased 11.7% to $103.4 million compared to $117.1 million in
the third quarter of last year. Company Stores revenues decreased 11.3% to $72.8 million, while
Franchise revenues were flat at $5.7 million and KK Supply Chain revenues decreased 15.1%
to $24.9 million.
But more importantly, the Company reported net loss for the third quarter of $798,000, or $0.01
per diluted share, compared to a net loss of $7.2 million, or $0.12 per diluted share, in the comparable
period last year. The Company continues to streamline their operations and close down
underperforming locations. They also are implementing their spoke and hub strategy which saw
20 new satellites open during the quarter, continued reduction in general and administrative expenses,
and reduced supply chain costs by outsourcing their coffee supply.
What was also interesting was their international numbers. Krispy Kreme has increased their
international franchisee sales increase by 48% year over year. While the American movement to
lose weight and ward off weight related diseases, the movement isn't happening in other nations,
especially in the Asian countries.
"As we look past the third quarter, we continue to focus on improving 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 prices," said
Daryl Brewster, the Company's President and Chief Executive Officer, in the earnings release.
Following the news, shares gained some 27% on 4.45 million shares traded. With the Company
continuing their international expansion as well as contracting domestically, more profitably locations
could become the result. With that in mind, investors would be wise to watch.

[setravis]

Krispy Kreme Shares Popped: What You Need to Know...

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes...just in case they're material to our investing thesis.

What: Krispy Kreme Doughnuts (NYSE: KKD) popped 12% in intraday trading today as investors feasted on a tasty plan to drive higher, more consistent profits.

So what: The company used its annual shareholders' meeting to present a plan to boost revenue and profits. During the next three quarters, Krispy Kreme expects to open 45 shops, launch three signature coffee blends, and expand retail distribution of its baked goods. Management hopes the new coffee offerings will bring more customers into their shops. 

Now what: The company just completed its first profitable year since 2004. In the most recent quarter, revenue jumped up 14% and EPS more than doubled as the company cut its operating and interest expenses. At a P/E ratio of 37 times, investors appear to be expecting the new plan to add more icing to the profit doughnut.

[setravis]

A Stock Shaking the Market...

A mighty temblor
Sweet-treats maker Krispy Kreme Doughnuts put on a spectacular earnings show last quarter, ringing up higher sales, widening margins, and generating lots more free cash flow. In fact, over the past year, as GAAP earnings have grown fivefold, owner's earnings have doubled. At least the numbers are moving in the right direction and the dark days of yesteryear seem a distant bad memory.

Day's Range: 8.25 - 9.15
52wk Range: 3.28 - 9.15
Volume: 3,568,817
Avg Vol (3m): 1,506,920
Market Cap: 606.42M
P/E (ttm): 49.34
EPS (ttm): 0.18
Div & Yield: N/A (N/A)

Technicals
Percentage Gainer

Last Price Quote is:
11.98%above 13-day EMA
28.02%above 50-day EMA
RS Rating: 8

This has held the gap and used 13 day as support...