Novice Investing - Can Krispy Kreme Give Sweet Return?

Date: Thursday 20th 2008f November 2008 06:02:38 AM

Can Krispy Kreme Give Sweet Return? - 03/15/2006

By: Novice Investing Staff

Krispy Kreme Doughnuts (KKD) has a new sheriff in town. After searching for nearly a year, it named Daryl Brewster as the Chief Executive Officer. Having a resume with Kraft Food Inc., many think that he will be the ideal person to lead for the doughnut makers. Share of Krispy Kreme has risen by 25% since his appointment.

One must thought that does a good CEO warrants a 25% rise in stock value. While we think that a good management is critical to the company's success, there is no guarantee that a good leader can turn a lousy business. Businesswise, Krispy Kreme is in a sweet spot. Starbucks and competitor Dunkin Donuts has succeed in exploiting new market opportunities to consumers without going into price war. Therefore, Krispy Kreme has a good chance of turning around, which causes the surge in share price this past week.

A short comment from Mr. Brewster might give investors some sense of the direction of the company. He is hinting on overseas expansion for the doughnut makers. His reasoning was that 5% of the mouth in the world are in United States. That is a fact. But, that does not mean that 95% of the rest of the world has 95% of the world's purchasing power. While Krispy Kreme is in the food business, there are a whole lot of people out there who does not have enough money to eat regularly, let alone doughnuts.

Furthermore, Mr. Brewster might want to fix up its US stores before expanding overseas. These stores has higher expense and is closer to Krispy Kreme's home. This method is preferable considering that Krispy Kreme does not have unlimited fund at the moment. In fact, it has quite a high debt level and the company needs to turn a profit soon in order to avoid bankruptcy.

We believe that Krispy Kreme has a good chance of turning around under Mr. Brewster leadership. However, the chance of it turning around by concentrating on expansion abroad is slim. It needs to improve its store base here in the United States.

END
You can view other helpful commentary by clicking here
Distributing your own investing content is easy. Simply, click here.

Disclaimer: The sole purpose of this article is educational. This article is merely the opinion of the writer and is not in any way a buy/sell recommendation regarding Krispy Kreme Doughnuts Inc. (KKD) or any other securities.

[Resources] [Forum] [Link Partner ] [Novice Investing Directory ] [ Submit Your Article Here ]