Sharpening our wits on the grindstone of Life: What goes around... .comment-link {margin-left:.6em;}

Sharpening our wits on the grindstone of Life

Sunday, January 23, 2005

What goes around...

They just don't get it. Whenever business gets bad, they blame it on external factors and try to hide poor performance from the stockholders. Sound like Enron/WorldCom/insert corporation here? This time, the SEC is taking a bite out of Krispy Kreme, the boutique doughnut, for padding shipments just before financial reporting periods end in order to make their numbers look good.

At first (after they got caught, of course), they blamed their poor performance on the lo-carb diet craze. Well guess what, lo-carb is no longer in vogue, and they still posted a weekly sales per store loss of 18% in the 4th quarter of 2004. Now they're talking about closing stores to pull them out of the hole (pun intended).

Also, to avoid further dunkings, they sacked their CEO, Scott Livengood. Scott was instrumental in taking the company public, as well as watching the stock plummet from $50/share down to $8. Of course, he'll still be in the dough - he's eligible for over half a million dollars in consulting fees over the next year, as well as stock options. At a projected profit margin of 5%, that means they have to sell over $10 million worth of doughnuts just to pay his consulting fees. Yeah, that'll help the company recover.

What they don't seem to understand is that, with the economy like it is, people are looking for value. A Krispy Kreme doughnut cost 50% more than the average donut shop doughnut. Granted, that's only 20 cents each, but who ever buys only one doughnut? Usually it's by the dozen, and unless you're in a sales profession, a box of doughnuts shouldn't be an investment.

Sure, they're good, but so is Starbucks' chocolate Chantico, and at three bucks a cup I won't be consuming them regularly either.

So, reality check, y'all. Cut your profit margin and make your doughnuts competitive, or go back to the boutique niche market. Unless, of course, the SEC finds more shenanigans when they conclude their investigation. Me, I'm going to go watch some championship football. And watch some other overpaid professionals get Kreme'd.

Speaking of which, great football weekend, eh? The Eagles and the Patriots both in championship matches! And no Randy Moss (Man, am I glad his fifteen minutes of fame are over).


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