Revenue for the locally based company dropped 22% to approximately $119.8 million for the quarter, down from $152.5 million for the prior-year quarter. As a result of store closings, operating expenses were down 23% to $97.1 million. According to the report, Krispy Kreme has closed 62 "factory" stores, which are ones that make donuts on the premises, since the end of fiscal 2005.
Store closings resulted in a 7.3%-drop in unit operating weeks for the quarter ended April 30, says the company. Sales dropped 16.6% from the same quarter a year ago, and average weekly sales per store were down 10.3%, according to the report. The company-wide decline in sales reflects a 24.2% drop at company-owned stores and a 10.3% slide at franchised units. Revenue in company-owned units was down $86 million for the quarter.
The company has been plagued by numerous problems not limited to an investigation of stock option grants, an issue that has caused nearly 200 public companies to delve back into their books and delay quarterly reports. In its most recent filing, Krispy Kreme disclosed that it had recorded $4 million in compensation charges related to stock options, primarily for three members of its board.
In January 2005, the company also ousted its former CEO, Scott Livengood, and other executives, accused of attempting to "manage earnings." Meanwhile, according to a different Dec. 22 SEC filing by Krispy Kreme, Courage Capital Management LLC, which holds nearly 7% of company shares, is seeking to declassify the company's board of directors, calling for it to elect all directors annually, rather than to staggered three-year terms.
Courage Capital's statement claims that annual election of directors would increase shareholders' ability to influence the company and eliminate "three years of isolation from the consequences of poor performance."
Krispy Kreme management retorts, according to the statement, that the current election procedure "safeguards Krispy Kreme against the efforts of a third party that is intent on quickly taking control of the business and not paying fair value for the business and its assets." Shareholders will vote on the Courage Capital proposal at the annual meeting, scheduled for Jan. 31.
Krispy Kreme did not hold a conference call nor issue a press release regarding the filing of its quarterly financial report to the SEC on Dec. 22. The company's stock, which trades under the call letters KKD on the NYSE, has more than tripled since its 52-week low of $3.35 a share on Jan. 18, 2006. By mid-morning on Dec. 26, shares were trading at $10.96 a share, up 2% for the day. The 52-week high of $12.11 a share occurred on May 11, this year.
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