Industry News | April 16, 2009

Krispy Kreme Makes a Profit

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Krispy Kreme Doughnuts (NYSE: KKD - News; the "Company") reported financial results for the fourth quarter and fiscal year ended February 1, 2009.

Fourth Quarter Highlights:

* Operating income for the fourth quarter was $1.5 million compared to an operating loss of $25.2 million in the fourth quarter last year.

* For the year, operating income was $4.8 million compared to an operating loss of $42.6 million last year.

* The net loss in the fourth quarter was $303,000 (less than $0.01 per share) compared to a net loss of $31.8 million ($0.50 per share) in the fourth quarter of fiscal 2008.

* For the year, the net loss was $4.1 million ($.06 per share) compared to a loss of $67.1 million ($1.05 per share) last year.

* Same store sales at Company-owned stores rose 0.9 percent in the fourth quarter and finished down 0.7 percent for the year, improving over year-to-date third quarter same store sales.

"We are seeing early signs of progress toward achieving a number of our strategic goals," says Jim Morgan, chairman, president, and CEO. "We earned an operating profit for the fourth quarter and also for the year, our first annual operating profit since fiscal 2004. We've also made measurable progress in implementing our initiatives."

That progress includes:

* On March 31, we opened the first of the Company's new small retail concept shops, a traditional factory store on a smaller scale, paired with tunnel oven technology that will enable us to offer our signature hot Original Glazed doughnuts virtually around the clock;

* We opened our second new Company small retail concept shop on April 9, and we are in active negotiations for 7 additional sites;

* We are reaching sufficient scale in several markets to begin deploying a more comprehensive and integrated marketing portfolio with enhanced use of broadcast media;

* Domestic franchisees opened 5 new small retail shops in fiscal 2009 and have additional stores planned;

* We are enhancing off-premises route profitability by closely focusing on door economics, measured by sales per mile and delivery cost per mile;

* We have identified the first new, longer shelf-life products for distribution to our off-premises customers beginning in late May, to more closely match our off-premises product offerings to consumer preferences;

* We have introduced a new sales-focused incentive compensation plan that incentivizes our off-premises sales force to grow the business and allows them to share in that growth

* We have begun reorganizing both our on- and off-premises operations to more clearly establish lines of authority and responsibility for results and to focus on driving customer satisfaction in both channels;

* We have engaged a new global marketing firm to assist in the development of integrated product, promotional and brand-building efforts for our growing international store operations;

* We have identified regional/global supply chain opportunities in order to leverage our growing international business, and are working to implement additional improvements that deliver efficiencies to international franchisees; and

* We have implemented new food and labor cost management tools and training to improve shop operations, and have more tools in the pipeline, all of which will benefit both Company and franchise stores.

"We also have reached agreement with our lenders on amendments to our credit facilities that should enable us to remain in compliance with the agreements and continue to provide backup sources of liquidity," Morgan says.

"We finished the year with $39 million of net debt, down $32 million in the past two years, and remain committed to further reducing our need for borrowed money.

"While there is still much work to be done, we continue to believe that our strategies are the right ones, and that our extraordinarily committed employees will continue to successfully implement those strategies. We look forward to seeing the benefits of these strategies more fully reflected in our financial results in the quarters and years ahead," Morgan says.

Management will host a conference call to review fourth quarter and annual results this afternoon at 4:30 p.m. (EST).

News and information presented in this release has not been corroborated by QSR, Food News Media, or Journalistic, Inc.